NNPC: It’s About Law and Corporate Governance

Sam Akpe

That statement by the Nigerian National Petroleum Corporation (NNPC) had long been expected. And when it came, it did not fail to impress us—in the negative. There was no part of that statement that clarified or appropriately responded to the serious issues of insubordination raised by Emmanuel Ibe Kachikwu. Instead, what we saw was a collection of denials and deceptions that ended up raising more questions than answers to the serious issues raised by the Minister of State for Petroleum Resources. It made some of us weep for this country.

Two clear issues were raised by Kachikwu in his petition to the President. The first was that of arbitrary award of contracts by the Group Managing Director of NNPC, Maikanti Baru, beyond the threshold allowed by government policy. The second was the issue of disrespect and insubordination to the board of the NNPC constituted by President Muhammadu Buhari with Kachikwu as the chairman. Yes, there were other little matters contained in the petition but these two attracted more media attention than others. The expectation was that in responding to these issues, Baru would be more articulate and focused. He refused to.

On the issue of award of contracts, Kachikwu had noted that: “The legal and procedural requirements are that all contracts above $20m would need to be reviewed and approved by the Board of NNPC,” and that “over one year of Dr. Baru’s tenure, no contract has been run through the Board. This is despite my diplomatic encouragement to Dr. Baru to do so to avoid wrongfully painting you as a President who does not allow Due Process to thrive in NNPC.
“Given the history of malpractices and the public perception of NNPC as having a history of non-transparency, the NNPC Tenders Board (NTB) cannot be the final clearance authority for contracts it enters into. The NTB which is a collection of top level NNPC executives and COOs, with the GMD as Chairman, cannot continue to be the final approval authority for multi-million dollar contracts and transactions involving NNPC to the exclusion of the Board. Board members have singularly and collectively raised these issues to no avail.”

He went ahead to cite the major contracts awarded by the leadership of the NNPC which were never reviewed by or discussed with the Board of NNPC: “The Crude Term contracts- value at over $10 billion; The DSDP contracts- value at over $5 billion; The AKK pipeline contract – value approximately $3 billion; Various financing allocation funding contracts with the NOCs – value over $3 billion; various NPDC production service contracts – value at over $3bn–$4 billion”

The minister informed the President that: “There are many more Your Excellency, in most of these activities, the explanation of the GMD is that you are the Minister of Petroleum and your approvals were obtained. However, the correct governance should be that the Minister of the State and the Board review the transaction and give their concurrence prior to presentation to you. As in many cases of things that happen in NNPC these days, I learn of transactions only through publications in the media.

“The question is why is it that other parastatals which I supervise as Minister of State or Chair their Board are able to go through these contractual and mandatory governance processes and yet NNPC is exempt from these?”
The summary of the explanation offered by Baru and his team was that since Buhari is the Minister of Petroleum Resources, all they did was to ignore the board of directors headed by Kachikwu, the Minister of State for Petroleum Resources and get the President’s approval. The team stated that it was important to note from the outset that the law and the rules do not require a review or discussion with the Minister of State or the NNPC Board on contractual matters. That is not true.

It went further: “What is required is the processing and approval of contracts by the NNPC Tenders Board, the President in his executive capacity or as Minister of Petroleum, or the Federal Executive Council (FEC), as the case may be. There are therefore situations where all that is required is the approval of the NNPC Tenders Board while, in other cases, based on the threshold, the award must be submitted for presidential approval.”

This is what the NNPC Act says about the conduct of activities at the NNPC. In Part I of the Act which deals with Establishment of the Corporation, it is stated: “There shall be established a corporation by the name of the Nigerian National Petroleum Corporation (hereinafter in the Act referred to as “the Corporation”) which shall be a body corporate with perpetual succession and a common seal and may sue or be sued in its corporate name. The affairs of the Corporation shall, subject to Part II of this Act, be conducted by a Board of Directors of the Corporation which shall consist of a Chairman and the following other members….”

In his petition to the President, Kachikwu did state clearly that the President had appointed him as Minister of State to serve as the chairman of the board of the NNPC. This is because the Act permits the President to delegate that office to whoever he wishes as long as that person is a minister of petroleum. This is stated in Section 3 of the Act. It is not the duty of the GMD or anybody to assume that since the President is the senior minister of petroleum resources, therefore approval of management decisions has to go to him directly irrespective of what the law says.

The issue is not whether Kachikwu is senior or junior minister. The question to be answered is: is he a minister of petroleum resources as stated in the act; and in that capacity, is he statutorily qualified to head the board; or was he appointed by the President to head the board? The answers to these questions are as follows: yes, Kachikwu is a minister of petroleum resources; yes, in that capacity, he is statutorily qualified to head the board; yes, he was appointed by the President to head the board. This therefore implies that any attempt by anybody to ignore the board simply because it is headed by a junior minister is a breach of the NNPC Act.

Without being a lawyer, it is not difficult to understand what the NNPC Act means when it states that: “The affairs of the Corporation shall, subject to Part II of this Act, be conducted by a Board of Directors of the Corporation which shall consist of a Chairman…” Taking a cue from other federal corporations or commissions, no management team is expected to by-pass the board and make its submissions directly to either the President or the Federal Executive Council. As a matter of fact, even where there is no board of directors in place, such commission or corporation must submit its proposals to the supervising ministry first; which in this case is the Ministry of Petroleum Resources.

As observed in an informed commentary last week by Dr K. A. Familoni, by appointing the Minister of State as the NNPC Board Chairman, “it is ultra vires for the GMD (who is also a member of the board) to circumvent the Board and its chairman in the conduct of the affairs of the NNPC. By his appointment as chairman, the President has delegated the authority of the Minister of Petroleum Resources to the Minister of State, as chairman with respect to the conduct of the NNPC corporate affairs; simplicita. All arguments to the contrary are futile and pure balderdash.”

The informed gentleman went ahead to state that the GMD and his partners in the Villa who have constituted themselves into an oil cabal and usurped the functions or the authority and powers of the NNPC Board are guilty of economic crimes and sabotage and should be prosecuted by the appropriate anti-crime bodies without further delay or rigmarole. He stated: “The cabal has been able to sidetrack the NNPC Board on the pretext that the President is the Petroleum Minister and is therefore the substantive chairman of the board. This pretext is false, self-serving and symptomatic of kleptocratic governance.”

This pretext is completely at variance with the position of the NNPC Act. The explanation by Baru and his team has raised more questions than answers. It has trapped them in a tight corner than they ever envisaged. By attempting to ignore and sideline Kachikwu based on personal reasons, the team, led by Baru has ended up breaching an Act of the National Assembly and deserve to be sanctioned. The good news is that the Senate investigation is already in progress. In a more civilised society, Baru should have resigned his office long before now.
–––Akpe, a former Assistant Editor at The Punch. Lives in Abuja.