The state-owned oil corporation needs immediate reforms

In response to the huge amount of money being illegally deducted by the Nigerian National Petroleum Corporation (NNPC) as a first-line charge from the federation account, the National Economic Council (NEC), comprising the 36 state governors in the country, recently proposed taking over the responsibility for subsidising petroleum products in their states. But the real issue goes beyond subsidy payments to the absence of due process, transparency and accountability in the management of the NNPC, an agency of government notorious for corruption and opacity.

 For years, the Nigeria Extractive Industries Transparency Initiative (NEITI) has been releasing reports about the mismanagement of the oil and gas sector and the need to bring integrity to bear in its operations.But there seems no indication that the federal government can muster the requisite political will to address such problems. Following the aborted Federation Account Allocation Committee (FAAC) meeting for March, governors of the 36 states had a meeting with NNPC in April over what they described as a consistent shortening of what should accrue to them from the federation account. That lingering issue is yet to be resolved.

 Addressing the legal, institutional and regulatory framework weighing down the behemoth is a huge challenge. “Information about Africa’s biggest oil industry is an opaque myriad of numbers. No one knows which ones are accurate; no one knows how much oil Nigeria actually produces. If there were an authoritative figure, the truly horrifying scope of corruption would be exposed,” a report in the Economist once stated. Unfortunately, no government has been able to summon the courage to address the impunity and the arbitrariness in NNPC with the overall aim of closing the loopholes that breed corruption.

 However, the current agitation by the governors, if well directed, may force a reform in the NNPC and make it more beneficial to the Nigerian people. According to the Chairman of Nigeria Governors’ Forum, Abdulazeez Yari of Zamfara, a decision would be taken this month on whether or not states should take responsibility for the subsidy they consume. “Our problem is the volume, the quantity of consumption which is not acceptable,” said Yari. “For instance, if you say we paid N800 billion subsidy, you will ask who are we paying the subsidy to? So, we are coming up with a strategy. By next meeting, we will definitely come up with a position of the government at both level of volume of what is being brought into the country and what the state and federal government collaborate to check.”

 Given that most of the states are so broke that they cannot even pay the salaries of workers, we are not surprised that their focus has shifted to the subsidy regime. But it will be very unhelpful to bundle the removal of petroleum subsidy with states’ capacity (or lack thereof) to pay salaries of workers. Petroleum subsidy, we believe, should be removed because it is inefficient, it is oiling corruption, and it is robbing society of vital resources that could be invested in hospitals, schools, roads and other critical areas that directly stimulate economic activities.

 As we have consistently argued on this page, a regime of unbridled subsidy in which a substantial slice of the national budget goes to service the consumption of one single item is detrimental to the development of any nation. But the issue at hand is how to make the NNPC more accountable and transparent in its dealings. The solution lies in the reform of the sector. The National Assembly has done considerable work with the Petroleum Industry Governance Bill (PGIB).

 We hope President Buhari will speed up the process of signing the bill into law when the reworked edition is eventually sent in.