Kachikwu’s Memo Tests Buhari’s Resolve to Clean up NNPC

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The run-in between the Minister of State for Petroleum Resources, Ibe Kachikwu, and Group Managing Director of the Nigerian National Petroleum Corporation, which was aggravated by a recent memo to President Muhammadu Buhari, would test the strength of the president’s desire to rid the corporation of sleaze. Chineme Okafor reports

In August 2012, ahead of the privatisation of the electricity generation and distribution companies created from the unbundling of the defunct Power Holding Company of Nigeria, a former power minister, Professor Barth Nnaji, who was part of the privatisation exercise, reportedly stepped down from his position following an allegation of inappropriate interferences in the process.  

Simply because a firm he once had dealings with was involved in one of the bidding consortiums for the 776 megawatts (MW) capacity Afam power plant in Rivers State, Nnaji, a seasoned power systems expert with lots of reputation to protect, was accused of influencing proceedings in the exercise to the advantage of the consortium.

Acting in the spirit of transparency, and to keep the privatisation exercise, which had taken a lot from Nigeria to get to the level it was then, Nnaji opted to resign his position as minister. The then president, Dr. Goodluck Jonathan, accepted the resignation to save the exercise, which was also heavily opposed by various interests.

The PHCN privatisation was then concluded by another minister, Professor Chinedu Nebo, who was appointed to replace Nnaji, and the government handed over the generation and distribution companies to their eventual preferred bidders in 2013.

 

Buhari’s Clean-up Mission  

Fast-track to 2015, when a new government headed by President Muhammadu Buhari took over from Jonathan and promised to reform Nigeria’s oil industry and clean up years of sleaze at the NNPC. To do this, Buhari in August 2015 appointed Dr. Ibe Kachikwu and charged him to reform the state-run oil corporation. In carrying out the task, Kachikwu retired and replaced top officers in the NNPC with mostly new officers he tapped from the private sector. He also launched massive reform exercises to get the country’s oil industry up from its inefficiencies. But Kachikwu was later replaced by Dr. Maikanti Baru as NNPC’s head, after he was appointed Minister of State for Petroleum Resources and board chair of NNPC by Buhari.

Taking over from Kachikwu as NNPC’s Group Managing Director, Baru equally continued with reforms initiated in the corporation but with some modifications. His operations in the NNPC were however rumoured to have ruffled Kachikwu, but these rumours were frequently debunked by officials in both the ministry and NNPC as wild imaginations of interests against the reforms in the industry and NNPC.

At a time, Kachikwu and Baru even disagreed on what it cost Nigeria to produce a barrel of crude oil from its oil fields when they gave contradicting figures on cost per barrel. Also, when a personnel change was recently effected at the corporation, reports alleged that Kachikwu, as the board chair of NNPC, was not carried along in the process. But Kachikwu never spoke out on the development. However, industry experts raised concern about a possible fractured relationship between the two.  

 

Leaked Memo  

Notwithstanding, what came as a continuation of the supremacy battle between Kachikwu and Baru soon emerged from a memo written to Buhari by Kachikwu, accusing Baru of flagrant violation of due process in the award of contracts and acts of insubordination. In the memo, which was dated August 30, the minister accused the NNPC boss of labelling him as “corrupt”, “anti-north,” and also being “in collusion with militants”,  and indicated that this was done to convince the president on the need to sideline him in the decision-making process in the state-run oil firm.

He also alleged that Baru awarded about $24 billion major contracts without his input or review by the NNPC board, adding that the contract procurements were done without recourse to the board.

The minister listed major contracts awarded by Baru without the input of the NNPC board to include $10 billion crude term contracts; $5 billion direct sales direct purchase (DSDP) contracts; $3 billion AKK pipeline contract; financing allocation funding contracts worth $3 billion; and NPDC production service contracts valued at $3 to $4 billion.

He added that he wrote the letter to the president after concerted efforts to have a one-on-one appointment with him at the State House failed since his return from medical leave in the UK.

But in all of this, the NNPC maintained a stoic position, preferring to stay away from the conversation. Its spokesperson, Mr. Ndu Ughamadu, stated that he was not privy to the contents of the letter and that it was not addressed to the corporation.

 

Stakeholders’ Reaction

Industry operators and stakeholders, including rights groups and labour unions, have requested Buhari to undertake a full inquest into the operation of the oil industry. Though the Senate has indicated it would investigate the internal intricacies of Kachikwu’s letter to Buhari, as well as the allegations against Baru, groups such as the Socio-Economic Rights and Accountability Project, has sent an open letter to Buhari requesting him to urgently refer the Kachikwu’s allegations of corruption and abuse of office against Baru to both the Economic and Financial Crimes Commission and the Independent Corrupt Practices and Other Related Offences Commission for investigation. They urged the president to also allow the right form of prosecution if there were sufficient evidence against Baru. SERAP’s request was not different from that of the NLC.

Similarly, other industry experts, who linked the disagreement between Kachikwu and Baru to a possible ambiguity in the line of authority created by Buhari’s retention of the substantive oil minister portfolio, stated that the development had created an uncertainty in the actual locus of authority or power of approval in the ministry and the industry at large. They warned that the danger from the development included the unsettling of the reforms and possible return of investment apathy in the sector.

According to them, the credibility of the government was at stake before the global investment community whom they had constantly tried to convince that transparency and due process was at the heart of its reforms in the country’s oil sector.

A former president of the Nigerian Association for Energy Economics (NAEE) and professor of energy at the University of Ibadan, Professor Adeola Adenikinju, told THISDAY by telephone that Kachikwu’s letter to Buhari disclosed that there was a big division in the ministry, which the president needs to quickly address. Adenikinju explained that if Baru was guilty of the allegations levelled against him by Kachikwu in the letter, then it would be appropriate for Buhari to clearly define the line of authority to avoid future instances of such division.

He said, “That shows that there is a big division in the ministry, and that the line of authorisation is not very clear, which perhaps makes the GMD go to the president and not the board. The president has to clear this uncertainty because investors will obviously run away if they find that they don’t know where the locus of power is or who is clearly in charge.”

He further explained, “I think that what the minister is calling for and which he stated in his letter was that the board has its responsibilities, and that it should be respected. Not looking at the board or going straight to the president for approvals means that there is no clear delineation of authority.”

Going forward, analysts are of the view that there should also be a clear, direct and unfettered line of communication between the President, who is the minister of Petroleum, and the minister of state in the ministry so that issues can be attended to speedily.