Untold Story Of Plot To Destroy Ribadu Report

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The report of the Nuhu Ribadu-led Petroleum Revenue Special Task
Force (PRSTF) is meant to change how the country’s cash-cow is managed, but
because of vested interests, it is being discredited. An insider account here
gives meaning to the plot.

The Nigerian National Petroleum
Corporation (NNPC) is the producer, seller and collector of proceeds from
sales. Then, it keeps the money, pays itself whatever it wants and gives the
remainder to government. This agency regulates International Oil Companies
(IOCs), but at the same time it is operating in partnership with them, though
it has no human and technical capacity to check the activities of the IOCs. For
the sale of crude oil produced daily, put at about 2.7 million barrels, it uses
about 40 traders, most of whom are associated with  top government
functionaries.

Nigeria is the only Organisation of Petroleum Exporting
Countries (OPEC) which uses such traders. Other oil producing countries sell their
crude oil directly to buyers.  Though the country’s three refineries
operate at 20 per cent of its capacity, NNPC receives 440,000 barrels of crude
oil per day for refining. Because it cannot be done locally, this quantity is
freighted to refineries in neighbouring countries. They are refined at a high
cost and imported into the country.

Over the years the above scenario has
played out in the oil industry – to the benefit of top officials in the
industry, who, pretending to be helpless, feed fat on the drops from the
loopholes. Government officials find the amoebic situation convenient because
it makes the NNPC subservient as a slush fund from where unbudgeted expenditure
can be taken care of.  Government officials relish in the easy cash
available. Then, enter the Ribadu-headed Petroleum Revenue Special Task Force.
It calls for the NNPC to be unbundled; insists on raising the capacity of NNPC
to supervise IOCs; wants oil traders (who are probably foot-soldiers of some
top officials) to be sacked; calls for better collection of royalty and taxes
from IOCs; recommends that NNPC should not make direct deductions from proceeds
of oil sales; and calls for proper book-keeping and transparency in financial
management in the petroleum sector.   The natural response would be
‘kill that report.’ And that is what government will likely do when the White
Paper on the Ribadu committee report is released.

CONTROVERSY OVER USE OF TRADERS
In the past some of the major
international oil firms involved in the trading included Glencore, Trafigura,
Arcadia and Addax. The local ones included Sahara Energy Ltd., Oando Plc, Aiteo
Ontario Petroleum and Taleveras. However, under the current arrangement,
three-quarters of the country’s daily oil production, put at about 1.6 million
barrels per day, will be given to some 40 traders to sell, among them 21
Nigerian firms. The increase in the number of buyers, though being done under
the Nigeria Content Act of 2010, is viewed with suspicion. In 2008, there were
28 traders. In 2009, it was reduced to 24. In 2010, there were 38 of them, and
in 2011, they increased to over 40. This increase is akin to what has been done
in the downstream sector of the industry, a situation in which many companies
that did not have the facilities to import refined petroleum products were
given licenses, leading to massive fraud.
In an advertorial last week, NNPC
didn’t deny the increase of the number of middlemen in the sale of crude oil.
Rather, it justified it thus: “The use of traders in the sale of crude oil is
an internationally accepted practice which even the IOCs adopt. NNPC does not
sell 100% of its crude oil through traders. Indeed, NNPC maintains a mixed-bag
of trading companies to facilitate wider market circulation and penetration
into new (captive-niche) markets. These companies include International
Traders, Indigenous Traders, International Refining Companies and NNPC
Subsidiary and International Trading Joint Ventures. All sales of Nigerian
crude oil are based on the same general terms and conditions and all payments
are made through Irrevocable Letters of Credit (ILCs) prior to liftings. It is
pertinent to emphasise that the NNPC sells all crude oil under the general
terms and conditions for sale of Nigerian crude oil.”
The spirit of the Ribadu report
suggested that even if this practice is legal, it should be halted because, as
Ribadu told President Jonathan “Nigeria is the only country in the world that
uses traders to sell its crude oil. The only other country that is doing so is
Congo Brazzaville. We should not be comfortable in this neigbourhood. This
practice is a rip off and therefore should be stopped.”

HOW ‘EXPLOSIVE’ CAVEAT ENTERED THE REPORT
At the presentation of the report to
President Goodluck Jonathan on Friday, November 2, 2012, Mr Steve Oronsaye
claimed the committee’s assignment was not concluded, hence the report could
not be implemented. After that saga, Dr Doyin Okupe, one of President Jonathan’s
spokesmen, took the project further by claiming that the committee did a shoddy
job. He made reference to a caveat, which said: “Due to time frame of the
assignment, some of the data used could not be independently verified and the
task force recommends that the government should conduct such necessary
verifications and reconciliation.”
Why didn’t the task force complete
its assignment? A member of the panel told our report that the caveat was
included in the report 24 hours to its submission to the president in order to
accommodate a suggestion by  Mr Bernard Otti, a member of the committee,
who had joined the NNPC as a Director (Finance).  The insider explained it
thus: “We completed our job on July 25, 2012 and each member was given the final
draft to study and recommend changes. Oronsaye, who had not been attending the
meetings regularly, asked for five working days to study the report. We gave
him two weeks. We gave a copy to the Minister of Petroleum, who promised to
study the report and revert to us for further discussions on the issues. Two
months after, we didn’t hear from her. There was no word from the Ministry,
until the report was leaked to the press.”
According to him, after newspapers
began to run stories from the draft of the report, the NNPC wrote a letter to
the task force members, saying the President wanted the report submitted on
Friday, November 2, and that on Thursday, November 1, members should reconvene
and put final touches to the report for presentation.
“At that meeting on that Thursday,
the draft was re-arranged, and Bernard Otti told the panel that the report was
too hard on the NNPC and that it should be toned-down. He then suggested that
we include that clause that says the data was not independently verified, and
that government could verify them. What data did we refer to? They were
documents from the NNPC, the CBN, the Federal Ministry of Finance and the
Federal Inland Revenue Service (FIRS). These agencies had representatives on
the task force, so we didn’t need to go back to them to cross-check every item.
To do so would take over one year. We didn’t know why he demanded for that
clause to be included, but because we felt the agencies cannot dispute the
figures they provided, we agreed to include it. We didn’t foresee how it could
compromise our report.  Now, it’s being misused.”
The task force member dismissed
insinuations that the committee didn’t have the expertise to do a thorough job,
arguing that “We had experts from the KPMG, the Accountant General of the
Federation’s office, retired directors of the Central Bank of Nigeria, Senior
Advocates of Nigeria (SAN), among 26 members of the task force. What other
expertise did we lack? I think government was shocked at what we discovered and
the far-reaching recommendations, hence it sought a caveat which some persons
have capitalised upon to discredit the report.”
As it were, in its advertorial, the
NNPC repeatedly referred to this caveat to fault the Ribadu Report. For
instance, faulting the committee’s observation that NNPC made direct subsidy
deductions before making payments to government, NNPC said, “It is indeed
unfortunate that a Task Force saddled with an investigative responsibility did
not take the pains to ascertain the correct process for determining NNPC
subsidy payments. For purposes of clarity we hereby state that the disbursement
of subsidy payments and Joint Venture cash calls from the Federation Account is
provided for under the Appropriation Act. In practice, subsidy payments due to
NNPC are not based on cash remittances but by way of credit notes to NNPC
against domestic crude oil purchases by NNPC. The values of the subsidy payment
certificates issued to NNPC by PPPRA are deducted from the cost of domestic
crude oil purchases by NNPC. NNPC is therefore within its rights to claim the
credits due to it for the said subsidy payments…”

ORONSAYE ON THE TASK FORCE
Our reporter gathered that Chief
Oronsaye was not actively involved in the business of the panel, but he was
tolerated because of his involvement in other government committees. But his
challenge to the panel before President Jonathan came as a shock to members of
the committee. The insider revealed to Sunday Trust that: “Oronsaye was not
available until towards the end of the task force’s work. He was not there
during the inauguration; he was not there when we designed our rule of
engagement; he was not there during the hearing from stakeholders. We invited
the NNPC, CBN, Ministry of Finance, FIRS, International Oil Companies (IOCs) to
give us data and explain issues raised. All of them came, except the NLNG,
which refused to come after three invitations. He was not available most of the
time. But he was given the treatment which all committee members received. The
only task force member who refused to take any allowance throughout the sitting
was Nuhu Ribadu. He didn’t take a kobo. We were shocked that Oronsaye came up
to discredit our report.”
In spite of this allegation, there
were reports at the weekend that Oronsaye attended four meetings. A
self-acclaimed associate of Oronsaye, Mr Ademola Ogunkunle, last Thursday
appeared on Channels Television to claim that he was privy to the minutes of
the 26-man committee and that Mr Oronsaye’s name appeared on the attendance
register on four of the panel’s meeting. Though other online publications have
carried a similar report from minutes of the task force’s meetings, Mr Oronsaye
has not come out to challenge the impression that he was not always available.
Malam Ribadu, while presenting the
report to President Jonathan, raised seven recommendations. He said, even
without the passage of the Petroleum Industry Bill (PIB) by the National
Assembly, the adoption of the recommendations would help the industry: They
include the following:
1) “To increase government revenue
from the industry, the Federal Government needs to put in place a coherent
financing solution that allows government fund its obligations under the JV
contracts. Funding government obligations will unlock additional capital from
its JV partners, which will over time increase government’s revenue from the
proportionate additional barrels of crude oil produced, royalties on the entire
production and taxes on taxable income.
2) “The FGN should take action and
enforce collections of outstanding royalties amounting to billions of dollars
from some of the oil companies operating in Nigeria. Mr President, we want
these companies to do business in our country but we also want them to give us
our entitlements. They make a lot of profit here and they go and Invest in
other countries. The least they can do is to pay us the royalties, petroleum
tax and penalties they owe.
3) “Nigeria is the only country in
the world that uses traders to sell its crude oil. The only other country that
is doing so is Congo Brazzaville. We should not be comfortable in this
neigbourhood. This practise is a rip off and therefore should be stopped.
4) “Increasing crude oil theft is a
national tragedy with grave consequences and there is need for urgent action.
That and general insecurity in the Niger Delta is denying us Foreign Direct
Investment (FDI) in the industry. We have given some recommendations including
Finger printing of Nigeria’s crude oil for us to be able to track stolen
products.
5) “DPR needs to be appropriately
positioned to regulate the petroleum industry and collect government revenue
due from royalties for oil and gas production, gas flare penalties.  DPR
should be empowered to ensure the commencement of the fiscalisation of govt
revenue from production and not sales as is the current practice
6) “The Task force has recommended a
comprehensive framework for automation of the industry for transparency and
accountability and also fighting corruption at all levels in the industry. With
corruption, nothing can be achieved. From my own experience, I want to tell you
that if you are embarking on reforms, it must be with integrity otherwise it
will fail.
7) “We also recommend the
establishment of an independent office for the transformation of the industry
for a fixed term with a specific mandate to implement the reforms accepted by
the govt based on the work of the various committees and task forces looking at
the sector as well as other earlier reform initiatives in varying stages of
implementation.”

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