The Miseducation of Maikanti Baru


Exactly a year ago, the Financial Reporting Council of Nigeria (FRCN), by its Establishment Act, tried to introduce a National Code of Corporate Governance. Had it not been suspended by the Ministry of Industry, Trade and Investment a few months after it had come into effect, the three-in-one code sought to provide a new code of corporate governance for the private and public and sectors and not-for-profit organisations, including religious bodies. The code was all-encompassing and sought to unify, harmonise and would have superseded all the existing sectoral corporate governance codes in Nigeria such as those regulating licensed pension operators, banking, discount houses, telecommunications and insurance.

But the minute it came into effect for the private sector and not-for-profit bodies, it hit a speed bump. It was rejected by the private sector for being in conflict with the Companies and Allied Matters Act (CAMA), would have led to the exit of several CEOs who had spent more than 10 years as heads of their companies, the downsizing of the number of executive directors allowed on a board, and the appointment of new directors. Despite the reservations of the private sector, it took the announcement by Mr. Enoch Adeboye, the General Overseer of the Redeemed Christian Church of God (RCCG) that he would be stepping down from his position as head of the church in compliance with code, for the code to be suspended. Adeboye’s announcement also led to the sack of the Executive Secretary of the FRCN, Mr. Jim Obaze.

Personally, I saw the suspension of the code as very unfortunate. Any concerns over certain aspects of the code that may have deterred investments or impeded the smooth running of private and public sector organisations including NGOs, could have been modified through stakeholder engagement until a code that is acceptable to all was fashioned out and a consensus reached to review the code every three to five years to ensure that it remains in consonant with the times. That Obaze was sacked and the code suspended because Adeboye, the head of a powerful church, was to step down from his exalted perch was unacceptable.

If private and public sector organisations are expected to abide by corporate governance tenets, the same tenets must, as a matter of urgency, be extended to NGOs and faith bodies which take funds from the public. They must be made to adhere to the same rules and not excluded from being made accountable and transparent just because they provide humanitarian and spiritual services. Churches and mosques, after all, own and operate schools, hospitals, tertiary institutions, shops and businesses that are profit-oriented. Some even lease their private jets to the federal government to convey millions of dollars in cash to procure arms for the military from the black market, so why should they be made exempt from accounting for their sources and application of funds. The danger of entrenching a culture of opacity in the administration of churches, mosques and the NGOs is that they could engage in illicit arms, drugs and human trafficking and funding terrorist activities in plain sight and keep getting away with it. It has happened in other countries, so Nigerians should not delude themselves into thinking that similar illicit activities cannot be replicated here.

Unsurprisingly, the Nigerian government’s mishandling of the National Code of Corporate Governance has been replicated in the last two weeks in its handling of the letter written by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu to President Muhammadu Buhari highlighting the absence of due process in the award of contracts by the Nigerian National Petroleum Corporation (NNPC) and the appointment of senior executives of the corporation. Instead of rebuking the Group Managing Director of NNPC, Dr. Maikanti Baru and ordering him to adhere to the chain of command and take his contracts and the relevant appoints to the NNPC Board for proper oversight, it deviated from the issue of governance, which was the substance and essence of Kachikwu’s letter. Rather, what we have been regalled with are sheepish, misguided and diversionary attempts by the presidency and Baru to engage in a popularity contest to defend the indefensible.

Starting from the beginning, the presidency was embarrassed that Kachikwu’s letter, which also highlighted the minister’s inability to get audience with the president, was leaked. For a government that has championed a Whistle Blowing Policy and whose legislature is in the process of enacting a law to give legal teeth to the policy, the reaction of the presidency deviated from the principle of encouraging whistleblowers to bring to light actions and activities that encourage and throw the doors open to impunity and rent seeking. It would be disingenuous for the administration to think that whistleblowing should start and stop at exposing fraud and outright theft from the treasury. The spirit and legislative framework for the Whistle Blowing Policy should also encompass due process, encourage transparency and oversight because where these are ignored impunity and corruption will forever remain entrenched in the Nigerian psyche and culture. Fighting corruption is not limited to catching, exposing and prosecuting looters of the treasury. It is also about installing the right institutional framework to ensure that corruption does not thrive.

Second, Baru’s response to the issues raised by Kachikwu in the memo was laced with misinformation and errors and what many of us saw as a Freudian slip, which sent the presidency and NNPC into overdrive to make a distinction between a “loan” and a “contract”. In his bid, with Buhari’s approval, to dismiss the award of contracts without recourse to the NNPC Board, Baru informed us that Kachikwu had no business ascribing values to the Crude Term Contracts and Direct-Sale Direct-Purchase Contracts (which incidentally are oil swaps but were renamed by Kachikwu because of the sleaze associated with them under past administrations), just because they were not procurement contracts.

Let us be clear, all contracts, and there billions of them, have a value, be it material or monetary. Even a marriage contract between a man and women is premised on the vows that they have made to each other to love, honour and obey, in sickness and in health, for richer or for poorer, till death do them part. When one party to the marriage fails to honour these vows, the other party could head to court to terminate the marriage contract. Even the Law of Contract states that a contract can only be deemed to have been formed when there is an “offer”, an “acceptance”, “consideration” and a “mutual intent to be bound”.

For this reason, I was bemused when Vice-President Yemi Osinbajo, a Senior Advocate of Nigeria (SAN), went out on a limb last Friday to make a distinction between a “loan” and a “contract”. Surely, as a highly regarded lawyer, the vice-president must know that a loan is in effect a contract. In this particular instance, an “offer” of loans had been made by a financial institution(s), an “acceptance” had been made by the international oil companies (IOCs) as NNPC’s joint venture partners, the IOCs would have been compelled to pay interest for the loans as the “consideration”, and both parties would have been bound by the loan agreement. Not stopping at that, Nigeria would have to repay the IOCs by permitting them to lift more crude oil than the Joint Operating Agreement (Contract) binding them to the agreement stipulates. Besides, all loans from financial institutions are covered by a loan contract/agreement stipulating the terms and conditions of the contract/agreement, effectively rendering Osinbajo’s clarification on what he actually approved – loan or contract – needless. It was merely an attempt at semantics and failed to hoodwink those who knew better.

In the same vein, NNPC’s crude term contracts and oil swaps have a value to them. When oil traders, companies or refineries are selected to lift Nigeria’s crude oil and either sell it in the international market or swap for petroleum products for one year, the quantum of crude that is assigned to all the traders put together can be computed and multiplied by the federal government’s budget benchmark for crude oil and the given period during which they are allowed to lift the country’s oil. From this, it is very, very easy to ascribe a value to both contracts, irrespective of whether they are procurement contracts or not. Moreover, if the federal budget every year is premised on a crude oil benchmark of a certain value and oil production output of a certain number of barrels per day, from which Nigeria earns more than 70 percent of its revenue, which is also included in the budget, what makes it impossible to ascribe a value to the crude term contracts and oil swaps that are assigned to oil traders on an annual basis?

As a corollary, no trader submits an expression of interest to lift and sell Nigeria’s crude oil or engage in swaps because it is a charitable organisation. The trader does so because it will derive a commission (or consideration). Should the traders divert the proceeds from the sale of crude oil or oil swaps, Nigeria stands to lose billions of dollars as revenue. Lest we forget, the Berne Declaration report from Switzerland in 2013 did allude to opaque oil deals and diversion by traders of Nigeria’s oil. It is for this reason the selection process for the appointment of traders must not just meet the procurement guidelines of the NNPC Tenders Board and the Public Procurement Act, but also the NNPC Board and the Federal Executive Council (FEC). That way, should any diversion take place and Nigeria loses billions of dollars in the process, it is not only the members of the tenders committee that can and should be held liable, but also the members of the Board of Directors of NNPC and the Minister of Petroleum Resources.

Another issue raised by Baru in his response is the fact that the Secretary to the Government of the Federation (SGF) had provided the guidelines for the procurement/award of NNPC contracts, citing the make up and processes of the NNPC Tenders Board and the provisions of the Public Procurement Act that empowers the Bureau of Public Procurement (BPP) to give a No Objection to contracts that meet a certain threshold. All well and good! But what he failed to inform us is where the rules of the NNPC Tenders Board and provisions of the Public Procurement Act preclude the NNPC Board from performing its oversight functions. The importance of this cannot be overlooked, because Baru’s position has set a precedent that affects not just the NNPC Board but all boards of agencies and departments of the federal government. Should we accept it, then the executive might as well dissolve all the governing boards of its agencies and departments, and the National Assembly proceed to amend their Establishment Acts to expunge the relevant sections that provide for the setting up of the boards.

Baru even went ahead to state that his decision not to seek the approval of his board stemmed from the fact that Kachikwu who was his predecessor had sought the same clarification from the SGF. The NNPC boss was not truthful; at the time Kachikwu headed the corporation and doubled as the Minister of State for Petroleum Resources, NNPC had no Board of Directors, so he sought and got all his approvals from the president. The NNPC board was only constituted when Kachikwu was relieved of his position as the corporation’s GMD.

Without citing the section of the NNPC Act that deals with the powers of the board, Baru needs to be reminded that the Act is very clear on the oversight functions of the NNPC Board and its powers to consider and approve the “work plans” and “budgets” of the corporation. I wonder how he expects the board to provide oversight to these two functions if the award of contracts and appointment of senior executives are not brought to its attention. The Act is even clear that the “fixing of the seal of the corporation shall be authenticated by the signature of the chairman and any person authorised in that behalf by the board”. In this instance, the position of chairman has been assigned by the president who doubles as the Minister of Petroleum Resources to his Minister of State for Petroleum Resources. The same Act further states: “A member of the Board who has any interest in any company or other concern with which the Corporation proposes to make any contract or arrangement or any interest in such contract or arrangement shall disclose to the Board the fact of such interest and the nature thereof, and such disclosure shall be recorded in the minutes of the Board, and such member shall take no part in any deliberation or decision of the Board relating to such contract or arrangement.” How are members of the board expected to make full disclosure if all contracts – procurement, management, crude oil lifting, loan, agency, lease, conveyance, etc. – are not brought to their attention?

Even if we were to accept Baru’s argument that he obtained the approval of the president, who by the NNPC Act can appoint an alternate chairman, “provided that nothing in the foregoing shall be construed as preventing the exercise by the Minister himself of any power so delegated”, the question to ask is does the Nigerian Constitution allow Buhari to usurp and assign to himself the role of Minister of Petroleum Resources, or minister of any other ministry for that matter? Perhaps, it is high time lawyers who know their onions challenge the constitutionality of a president conferring upon himself the role of Minister of the Federal Republic of Nigeria. Former President Olusegun Obasanjo did this for eight years; the late President Umaru Yar’Adua did likewise, albeit briefly, and now Buhari has continued along the same path.

Section 138 of the Constitution expressly states: “The President shall not, during his tenure of office, hold any other executive office or paid employment in any capacity whatsoever.” Section 147(1) goes further to state: “There shall be such offices of Ministers of the Government of the Federation as may be established by the President,” while Subsection 2 of the same section states: “Any appointment to the office of Minister of the Government of the Federation shall, if the nomination of any person to such office is confirmed by the Senate, be made by the President.” Deriving from the above, I find it inconceivable that three presidents have consistently violated the spirit and letters of the constitution without challenge.

It is very clear in black and white that Buhari has no constitutional backing whatsoever to assign to himself the post of Minister of Petroleum Resources. Like Obasanjo before him, his injecting himself into the system has created governance chaos, including Baru’s admission and later denial that the president approved loans/contracts for NNPC when he was receiving treatment for his illness in the United Kingdom and had transmitted power to Osinbajo. If it is later discovered that there has been a cover up as to who actually approved the said loans/contracts, this portends a major constitutional crisis and is an impeachable offence. But I digress.

The NNPC Act also requires the Minister of Petroleum Resources, in this case Buhari, to submit the memos devolving from his ministry and its parastatals to FEC for final ratification. To date, I am not aware that FEC at the end of its meetings has announced that approval has been given to any NNPC contract whatsoever. Policies from the Ministry of Petroleum Resources have certainly been approved, but no contract approvals have been made public. If announcements on contract approvals for road projects, hospital projects, power projects, education projects, and so on, running into several billions of naira or dollars are made public at the end of FEC meetings, why are those of NNPC being exempted from the same treatment? Is there anything special about oil contracts that make them exempt from full disclosure?

The truth of the matter is that Buhari is acting with the same impunity started by his predecessors in office. Obasanjo as oil minister was known to give the same anticipatory approvals to his two NNPC GMDs – Jackson Gaius Obaseki and Funsho Kupolokun – without sending his memos to FEC for final approval. It was not until a few weeks before the end of his second tenure that the former president brought in the ubiquitous Ghana-must-go bags full of NNPC memos, for which he had given anticipatory approvals, to FEC for final ratification. This should not be allowed to continue unchallenged.

Kachikwu’s memo in the final analysis once again brought to light the opacity and poor governance structures in Nigeria’s oil and gas sector. NNPC despite its pretensions at transparency by making public its management accounts, still fails to comply with its Establishment Act requiring it to audit its accounts. It is not just NNPC that is guilty of this violation. So many agencies of government are guilty of the same offence. That is why I am all for the enactment of the Petroleum Industry Bill (PIB) which has sat in the National Assembly un-passed for 10 years.

The problem is that NNPC has always been seen and used as a conduit for slush funds by successive governments. It is for this singular reason the sixth, seventh and eight National Assemblies have gone through the motions of legislating on the PIB, but never getting it passed. There are too many vested interests in government, the National Assembly, NNPC and among the IOCs that prefer for the rot to subsist and continue to fester. It is only through the PIB, paving the path to the balkanisation of NNPC, its proper corporatisation and the eventual sale of some its shares through a public offer on the stock exchange, that we can even begin to imagine a national oil company of our dreams.