Home > Breaking > HIGHLY RECOMMENDED: This Yam, This Goat, This Country: Pwc On NNPC – Part 2

HIGHLY RECOMMENDED: This Yam, This Goat, This Country: Pwc On NNPC – Part 2

No one has the right to retain money that should come to the federation account. Constitutionally, it should come and then , if expenses are legitimate, they should be presented transparently and properly approved. To even admit that you have withheld $10bn or $12bn and then say this is what I did with it is, frankly speaking, not even the beginning of an argument” – Sanusi Lamido Sanusi, speaking to Gavin Serkin, author of ‘Frontier

Part 1 is here if you missed it.

We now know the measurement of the yam ($69bn) that was left in the care of the NNPC goat. And we also know how much the goat handed back to the Nigerian treasury ($50bn). The debate now is what right the NNPC had to eat so much ($20bn) of the yam belonging to the Nigerian people, if it had the right to eat any at all.

A lot of the corruption and mismanagement and outright theft going on in NNPC is sickening and frankly, depressing. And it leaves Nigerians and especially the incoming government, who campaigned from Potiskum to Port Harcourt with the message of ‘Change’, with a question to ponder – What do we do with NNPC? Can NNPC change? Can it be reformed? How do we change it? If you prevent the theft or mismanagement of even $1bn, that is potentially 1,000MW of electricity you can add to the grid. The sums in question are not small.

I Have Good News

In 2010, Transparency International and Revenue Watch carried out assessments of 44 oil companies (private and state-owned) around the world, including NNPC. On the question of Organisational Disclosure, here’s how NNPC scored in their ranking:

Screen Shot 2015-04-29 at 20.57.15

Yep, our own dear NNPC came last (or first from behind). TI and RW went on to describe NNPC as the world’s most secretive oil company. Nobody knew the size of the yam to begin with except the goat itself and it was never going to publish it in the newspapers. Any attempt at openness was always resisted.

Sanusi Lamido Sanusi, as CBN Governor, said he became ‘obsessed‘ with understanding how the oil industry worked and where the leakages were happening. People who are obsessed about something can be very useful indeed.

It is important to understand this point – SLS had no direct access to NNPC’s books. From his letter to President Jonathan dated September 2013, it is clear that he got no cooperation from NNPC. All the numbers he used were investigated and determined by his office.

And yet, he came very close. He calculated NNPC’s revenues in the period to be $65bn while PwC calculated it to be $69bn – he missed the target by 6%. Here we have the ‘world’s most secretive oil company’ but someone looking from the outside was able to, with a bit of hard work and ‘obsession’, come close to figuring out the numbers. (PwC had access to NNPC’s numbers and documented all the revenues with over 30 pages of calculations in their report).

This is the good news I have to share – It is now possible to know almost the exact size of the yam even if NNPC don’t want us to know. They can lie all they want, obfuscate all they want, pretend all they want – that will not stop a serious and determined person from knowing. The game where the goat repeatedly under reports the size of the yam or even tell us there was never any yam to begin with, is over.

How Much Yam Did The Goat Eat?

Now that we are able to determine the original measurement of the yam, independent of NNPC, the next step is to figure out how much of it has been eaten.

The even better news is that this one is easier to determine. If NNPC pays money into the federation account, many people will know about it. The account is at the CBN. The only other place NNPC can send money to is FIRS, the taxman. This was the cause of the initial discrepancy where SLS said the amount outstanding was $49bn – some of the money had apparently been sent to FIRS instead of CBN. No problem.

The important point here is that CBN and FIRS are outside of NNPC. If NNPC don’t cooperate, other people can.

This is the second leg of the equation – we can determine the amount of yam sent to the Nigerian treasury. This greatly reduces the challenge of dealing with an opaque organisation that refuses to cooperate.

And it means we can reduce the issue to a simple question that puts NNPC on the defensive – the original yam was $69bn, you have given us $50bn. Where is the rest of it and what did you do with it? Simple.

Before PwC There Was KPMG

In 2010, KPMG was hired by the Federal Government to investigate the usual NNPC shenanigans. It submitted its report in November 2010. Find it here.

Here’s what they were asked to investigate as part of their ‘Forensic Review of NNPC’ (that forensic word again eh?):

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It is not much different from what PwC were asked to do last year – determine the size of the yam and compare with what had been declared.

As usual, KPMG found NNPC up to their usual goat tricks and games. The one below was my favourite:

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They did not even bother to tell a plausible lie. This is the confidence of an armed robber in action. Of all the places to obtain an exchange rate for something so serious as remitting money to the federation accounts, these goats claimed they got it over the phone despite the fact that the CBN published the exchange rates on its website.

So many issues were identified with the way NNPC ran its operations. Subsidy issues featured prominently as you’d expect. Here’s another sample:

Screen Shot 2015-04-29 at 21.58.15

The same goat games yet again. Every single failing identified came with a recommendation on how to fix it by KPMG. And what happened? It went in NNPC’s left ear and came out of the right ear immediately. In 2009, NNPC reported that it lost N8bn due to pipeline vandalism. KPMG recommended increased monitoring of pipelines and use of technology. Ok. By the time of the PwC report, they were spending $48m on ‘pipeline surveillance systems’. Alas, the amount reported as losses from pipeline vandalism has now transformed to $760m. Sebi you people said they should deploy technology? Ehen na.

In 2010, KPMG observed that they were using Sun Accounting Systems and noticed that the system was not robust enough for its needs given that the system was not fully integrated and excel was being used quite prominently. It recommended that SAP, a more robust system, be implemented as quickly as possible. No problem. By the time PwC did their work, they confirmed that NNPC was indeed using SAP. Yet, all that has happened is that a bigger piece of yam has disappeared.

See what KPMG said on their data management in 2010:

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Now compare with what PwC found last year:

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Dem no dey hear word. Goats.

Are We Here For Tea Party? 

Do we really have time for this merry-go-rounding where we will be carrying out a forensic exercise on NNPC every 4 years like it’s the olympics? And then the document is filed away and they pretend like nothing happened. I am not convinced that NNPC will suddenly come to a kind of enlightenment where they are able to look at the yam and leave it untouched.

In the meantime, there is a country in need of so much fixing that the problems are almost overwhelming. Every kobo counts and we can’t really afford a situation where people are making addition ‘mistakes’ costing $40m. We are not here for tea party as the intellectual Nigerian Minister, Musiliu Obanikoro, famously put it not too long ago.

There is something devious about NNPC and the way it seduces any government in power. Everybody ‘probes’ it but no one ever really reforms it. Obasanjo ‘temporarily’ made himself Petroleum Minister in 1999. He ended up doing the job for 8 years. NNPC enters the government like a virus and typically, when politicians are broke and looking for money, NNPC can produce the cash. This is how the corruption starts and typically, it can never be reversed.

A fundamental question must now be asked – is it really worth anyone’s time to embark on ‘reforms’ of NNPC? Are the chances of success for such reforms up to 10%, if not dead on arrival?

With Love From Mexico

In August 2014, Mexican President, Enrique Pena Nieto, signed a landmark energy reform bill into law. After 76 years, the law effectively turned Petroleos Mexicanos (PEMEX) into a private company. It will now need to be audited regularly and publish reports like any other private company.

Part of the problem with NNPC is that it gets too much time alone with the yam before anyone checks what is going on. So we are reduced to the roundabout games of ‘forensic audits’ every 4 years for something that should be done regularly. 4 years is a long time – long enough for a multitude of yams to disappear without trace. Certainly, if NNPC was forced to publish reports quarterly and being audited yearly (with a regular half-year audit), there will be less room for the kind of long standing problems we are seeing.

I don’t think privatising PEMEX was an easier job than for NNPC, and yet a President who was determined to do it before he ran out of steam, managed to get it done. What’s Nigeria’s excuse?

With Love From China

Western countries have typically privatised their national oil companies e.g BP in Britain. This has not stopped oil from flowing out of the North Sea. The government simply focuses on collecting the taxes. True, the Norwegians still have Statoil (67% owned by the government) but we can all agree that the Norwegians are outliers – they don’t even spend their oil money hence their mammoth sovereign wealth fund. Also worth noting that Statoil is not fundamentally different in structure from Petrobras in Brazil. Yet, they couldn’t be more different judging by the ongoing scandal in Brazil that has hobbled the President, Dilma Rousseff.

The Chinese take a different approach – instead of having just one national oil company, they have three – PetroChina, Sinopec and CNOOC – mighty ones which compete against each other in some ways and also go out into the world to gain business and expertise. Further, you can find the accounts for CNOOC, PetroChina and Sinopec on their websites. Go to NNPC’s website. If you can find any accounts there, I owe you goat meat pepper-soup.

This options means we break NNPC into say, 3 new companies that compete directly with each other. Some might say when you have a problem like NNPC, why do you want to multiply it into 3? Good question.

The point here is that there are several ways to achieve the same thing. There is absolutely nothing that says we should have this NNPC model and keep ‘reforming’ or threatening to ‘reform’ it every few years. Or we can vote for change just like we just did in the national elections.

Scatter The Place

There is however another option. The first thing to understand is that it is not by force to have a national oil company. The decision that gave birth to NNPC in the 1970s – a creation of Obasanjo – cannot be said to have been the correct one. Indeed, at the time Nigeria was going about nationalising things, the West and China were moving towards market economies. Since 1977 when it was established, the company has been a constant source of pain for the country. Much of what we are seeing today is not new.

My preference is for NNPC to be completely dismantled and the government moves to a tax based system. For it to cease to exist. For it to be completely neutered. We have had enough of this monster that no one is able to control anymore and which answers to its own rules. And now is the best time to deal it a decisive blow from which it will never recover. It has been exposed and is no longer able to be the secretive organisation it once was. If it lies, with a bit of investigation, we can find the truth. Nobody trusts a word it says anymore and the old trick of telling the public that we do not ‘understand how it works’ has now expired. We really do not even need to know. Once we know the original size of the yam and the amount it tendered, it will need to come up with an explanation for any differences.

What is needed now is political will to bring this goat to heel. It is all well and good making the right noise as President Buhari surely will. But the follow through is the koko. So many names are already being bandied about as possible petroleum ministers (mostly cowboys and charlatans so far). We are going to need someone who is determined and can zero in on a cause to smash this goat that corrupts a nation and its government to pieces. The person will need to have integrity in bundles. Ability to pray will be a bonus for we know there are demons in there.

Margaret Thatcher famously said that if you want something done, you should ask a woman. I know a woman who fits the bill for this job.

Her name is Obiageli Katryn Ezekwesili.


P.S I think it’s fairly obvious that people need to be severely punished for what has gone on in NNPC. But in case it’s not obvious that this is my position, I’m restating it. NNPC only gets away with what it is allowed to get away with. This must stop.

As someone said to me recently “I did not queue for hours on March 28th to vote for people to get soft landing”. President Buhari, be guided – People Must Go To Prison. No Ifs, no Buts. 

Author: Feyi Fawehinmi  (http://aguntasolo.com/)
Accountant. Manchester United fan. MBA. Political junkie. Lover of economics (without the graphs). Free markets FTW. Fiscal conservative (low taxes, enterprise should be easy, no opinion on social issues). Wannabe photographer.

Nigerian or not – depending on the level of frustration I feel with the state of the nation on any given day. Rants on various issues mostly concerning Nigeria from the safety of London.



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