THE CHANGE FOR TOMORROW

The recently released PWC report just like those of the Aig-Imoukhuede Committee, Nuhu Ribadu Committee, KPMG Report, NEITI 2009-2011 Report and several others have highlighted the level of fraud and infractions in the operations of the Nigerian National Petroleum Corporation otherwise known as NNPC. The die is cast, either Nigeria reforms NNPC or NNPC destroys Nigeria.

Nigeria must be ready to take drastic and far-reaching measures in its national oil conglomerate. It is a behemoth that is unable to functionally move its body parts so they must be dismembered and left to exist on their own.

The call to the incoming administration is to immediately reform NNPC along the lines of the suggestions below while it carries out its probes or any investigation into the past. One should not be done before the other – they should be done simultaneously.

It is our firm belief that the passage or nonpassage of the PIB will not affect the suggested steps to be taken. The bill will be most relevant in our relationships with the IOCs and not the existence of NNPC as a commercially viable entity. The recent forensic audit of the NNPC called for a review of the NNPC Act as the content contradicts the requirement for NNPC to be run as a commercially viable entity. We say this, if you break up NNPC now as presently constituted you would not need to go through this circuitous path. The PIB is there as a recent lesson- eight years of political meandering with nothing, absolute nothing to show for it.

These suggestions, if implemented, will create wealth for the country through the sales of assets, taxes to be earned from profitable enterprises that would have been spun off, savings, creation of employment, industrial expansion in the oil and gas sector and the deepening economy. Access to wealth and wealth-creation will become democratised and made open to through the listing of some of the enterprises on the Nigerian Stock Exchange. Unmistakably, Nigeria stands to make immediate savings of over $500 million dollars monthly or almost $6.5 billion annually at the minimum. Our simple takeaway - FIX NNPC and the first step to sustainable CHANGE would have been taken. Leave NNPC the way it is or do only a cosmetic make-over and the CHANGE mantra would just be six letters of the alphabet.

The first fix should be the refineries in Port Harcourt, Kaduna and Warri which should be fully privatised. It is a national deception that these refineries are still under government control and ownership while we import more than 95% of our refined petroleum products requirements. Privatisation will ensure that the over N10 billion used for running the monthly operations and the periodic $110 million used for Turn-Around-Maintenance of the refineries are saved. Also the 450,000 barrels of domestic crude allocated for refining will be transparently and accountably utilised. After ensuring that our refining capacity has been taken care of, government should take a second look at how we sell our crude oil by creating a new company, from the merger of NNPC’s Crude Oil Marketing Department (COMD) with Hyson and Duke Oil, to become the Nigeria Oil Trading Company (NOTC). Fifty-one per cent of this new company should be sold off to private entities while 49 per cent of it should be sold to Nigerians on the floor of the stock exchange. Selling of crude is a specialist trade just like the retailing of refined petroleum products so NNPC should not be caught selling fuel at the pumps.

What to do with NNPC RETAIL? It should be sold off in a proportion of 51 per cent to private entities and 49 per cent to Nigerians through the stock exchange. Ultimately all the shares of this company should be listed on the stock exchange just like it is for Conoil, Forte Oil, Oando, etc. Should NNPC be worried about how the raw material that is the source of the refined products it sells is got? The answer is yes and no. Yes it should facilitate the processes of production; no it should not burden itself with everyday production issues. So the Nigerian Petroleum Development Company Limited (NPDC) should be sold with private entities taking 51 per cent of the company while 49 per cent should be sold to the generality of Nigerians through the stock exchange. In order to ensure that NNPC’s albeit government’s avowed determination to increase indigenous oil production is achieved, the private entities which would acquire this company must be fully Nigerian owned. The complexity of the oil and gas sector cannot be over-emphasised as every step to be taken in the sector is a complex mix of activities. Those who wished to deepen and expand Nigeria’s participation in the sector through the creation of subsidiaries probably never envisaged an NNPC that would be unable to look after itself.

Nowhere is this complexity more emphasised than the Products and Pipeline Marketing Company Limited (PPMC). The company as presently constituted should be unbundled and the different parts sold off. The depots, jetties, terminals and the pipeline network should be broken up and offloaded to private entities. All the depots should be sold off 100% to private individuals while the terminals and jetties should be concessioned off to Terminal Operators. The marine division should be sold as a unit to private entities that are fully indigenous- this will ensure that the Cabotage Act is complied with. 51% of the pipeline network should be sold off to private entities and 49% of the network should be sold to Nigerians on the floor of the Stock Exchange.

We are certain to hear that National Security will be compromised if the terminals and jetties are concessioned to Private Terminal Operators but we should ask them to look at our ports which are our major points of entry and are presently managed by Private Terminal Operators.

The complexity in PPMC is almost replicated in the Nigerian Gas Company Limited (NGC). The gas pipeline network should be spun off and merged with the PPMC pipeline network and sold off as one entity while the core gas gathering arm should be sold off with private entities getting 51 per cent and forty-nine per cent should be sold to Nigerians through the Nigeria Stock Exchange.

With the core of NNPC going off there would certainly be no place for the National Engineering and Technical Company Limited (NETCO) and the Integrated Data Services Limited (IDSL). Both companies should be sold off 100% to private entities. Government should put a structure in place at IDSL where 100% of the data acquired for government is owned and warehoused by or for government.

When the old NNPC is all gone what would the National Petroleum Investments Management Services (NAPIMS) be doing? This company should become the new NNPC, a trimmed down and slim entity that should simply manage the JVCs, PSCs, SCs and whatever E& P partnerships Nigeria wants to forge with the IOCs.

This new era NNPC will be totally unsuited to managing its own independent pension fund so the NNPC Pensions Limited should be fully privatised.