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NNPC’s house of fraud

Posted by By IKENNA EMEWU ( on 2008/04/25 | Views: 852 |

NNPC’s house of fraud

A treat awaits the 26 members of the House of Representatives who have got the mandate to have a peep into what went on in NNPC between 1999 and 2007. These were the years Chief Olusegun Obasanjo straddled the theatre as both president and petroleum minister.

A treat awaits the 26 members of the House of Representatives who have got the mandate to have a peep into what went on in NNPC between 1999 and 2007. These were the years Chief Olusegun Obasanjo straddled the theatre as both president and petroleum minister.

Reports, petitions from both within and outside the corporation including and audit report conducted by the corporation itself – have all come up with one verdict: NNPC is a running story of fraud and is undeniably, the country’s melting port of corruption. A monument to graft.

It, therefore, looks like the House panelists would have to get an eye ointment, and a balm for the heart, to see what awaits them and still retain their normal sight and to bear what would come their way without heart muscle tear.
It will be staggering. It sure promises to be a grand theatre, and the acts that would emanate would belittle the best of the acts ever seen in Nigeria.
The power sector probe availed Nigerians the privilege of hearing of state fraud in billions of dollars. Fraud here in Nigeria, as we have seen does not denominate in the weak and crippled naira any more.
As the nation warms up to the duel on how and what happened to oil money in NNPC, SATURDAY SUN dug up a document of 14 pages whose content would be of importance to the panel and the nation in general.

Welcome to robbery
The content of the document is hyper-sleaze, rot and fraud in billions of naira and dollars whose details show it must have emanated from an insider who has the true picture of what happened in the sector in the years Obasanjo was in charge. But like the summary of the document said, even this, is only a tip of the iceberg of the gargantuan national rip-off in the country’s most strategic sector.
The summary of the fraud scheme is that there were three major fronts through which NNPC funnelled money from the public coffers into unknown private pockets. One of them is the deliberate upping of the daily crude production and sales quota as against stipulated OPEC allocation to Nigeria. While this ignites a bad trend of flooding of the market with excess oil supply and an attendant lower price, the accruable income never gets into the Nigerian purse.
Another strategy was the diversion of interest income from illegally transferred money from the NNPC Joint Venture account.
The third conduit was the diversion of money through a non-existent Joint Venture account cash call arrears.

N512b vanishes
Between 1999 and 2002, the document, the bulk of which information was actually got from an internal audit of the NNPC, indicates that the NNPC which executes the Nigerian OPEC quota was allocated a certain number of barrels of crude for production and export to the international market. But NNPC hit an excess quota production and sales of 316,445,301 barrels. Normally, this development would have meant more revenue to the nation. But, don’t expect that, because the money from that over-sale has not been traced.

The then subsisting formula for revenue sharing between the federal government and oil companies in the production quota was 58 percent for the FG - here represented by the NNPC - and 42 percent for the oil companies.
From this figure of above-the-quota crude, 58 percent would have meant 183,538,274 barrels which translates to $4.5b income at $25 per barrel at the prevailing acceptable or pegged exchange rate of N111.6 to $1 at the period.

The money that would have come into the purse of the nation in naira should be N512,071,784,460. An annual breakdown of the crude production showed that between June and December 1999, OPEC gave Nigeria a quota of 403,390,000, and NNPC rather produced 499,774,775, an excess of 46,384,745 barrels. The excess was taken up to 80,601,101 in 2000. NNPC produced a total crude quantity of 828,618,101 instead of the 748,011,000 approved by OPEC. In 2001, the story was not different with an excess production of 135,201,184 from a total of 863,835,184 as against OPEC quota of 728,634,000. OPEC in 2002 gave NNPC powers to produce and forward to the international market 478,851,000. Instead of sticking to this, NNPC produced 542,103,211, with an excess of 54,252,271. All the excesses of NNPC crude production added up to 316,445,271. The 58 percent that acrues to FG was 183,538,274 barrels.

The House panel has to put eyes into the water, as it were, to find where these staggering amount of money strayed to.
Most shocking about the money is that during the period under review, there was a scourge of non-implementation of budgets as passed. The reason for this impeachable blunder was always that there was not enough revenue to handle state projects as projected in the appropriation Act.
“How could we have made so much money in a period due to the steady rise in price of crude oil and quantity, yet we were fed with stories of inadequate revenue?”, the audit report queried.

But, as if that was not enough sleaze, during this period, NNPC was allocated 300,000 barrels of crude per day for domestic refining, a quota it was not able to refine half of. No Nigerian does not know that the problem the citizens suffered during Obasanjo’s eight years was that of incessant fuel pump price increase whose main reason was because NNPC only imported refined petroleum. As NNPC tottered on this decay of non-domestic refining, it rather had its daily crude domestic allocation jerked up to 445,000 barrels per day from April 2001. What the excess on the quota it could not refine was meant for cannot not be explained now, until a probe is conducted.

A conduit company
There was a company that has affinity with a South American country that really assisted NNPC in its deals to ship crude oil around and stash the income in individual pockets. The company never actually had a concrete account that was in tandem with that of NNPC over the oil lifting contracts and sales. This company that has its roots in Bermuda purchased crude from NNPC and resold to other companies as it sold refined products in exchange to NNPC.

“In order words, what NNPC reports as sales to the company is not reflected in the company’s purchases records. For example, in 2000, NNPC confirmed that it sold 54 million barrels of crude worth $1.473 billion to this company. But the company in its account confirmed that it purchased crude oil and petroleum products that amounted to $225m. In 2001, the same disparity occurred as NNPC has in its records, a business deal of 37.5m barrels of crude worth $878.6m to the Bermuda company. But the company holds otherwise, insisting that it bought goods of only $227m in the year.
Since within two years – 2000 and 2001 - the value of refined petroleum this company supplied NNPC was $250m and $205m respectively, the clear logic is that “NNPC may have diverted crude oil worth $2.0b through this company.

Double loss
Unfortunately, the double jeopardy is that the diverted crude must have been produced with federal government money deducted from the special fund for this purpose called the Joint Venture Cash Call Account which is subject to the approval of the National Assembly. As Nigeria lost the revenue from the account to produce a product that an unknown person took the proceeds, it lost in two ways. This diversion deal arising from under-declaration of sales quantity would be a pointer to how the money from the excess crude quota was handled. Whatever happened to the money, or where the money is, is a question only the House of Representatives would answer in due course of its probe. But the truth is that the ailment that made the huge money hide in some pockets other than those of the FG must be diagnosed within or between the NNPC under Jackson Gaius-Obaseki and the president/petroleum minister, Chief Obasanjo.

NAPIMS, CBN, NNPC – an alliance in fund diversion
The Joint Venture Cash Call Account, the one NNPC draws money from to run the cost of crude production, as at the period under review, was operated and held by the Chase Manhattan Bank of New York, that is now JP Morgan Chase. That account was a dedicated one. But it earned $53,623,280.82 as interests income between 1999 and 2002. The account was managed by the NNPC which issues instructions on disbursement. But the CBN carries out the instructions. The interest accrued translates to N5,984,358,139.5.(approximately N6 billion).

The report at the disposal of SATURDAY SUN says the account, contrary to Obasanjo’s regime’s claim to anti-corruption stance, was instead a “beacon of corruption. It would appear that the people in charge in NNPC ran the corruption regime to the admiration of the petroleum ministry since nobody asked them questions or apprehended them for any wrong action”.

Recall that after Obasanjo took over power, Gaius-Obaseki, the boss in NNPC told Nigerians that the Joint Venture Companies were owed cash call arrears of $1b or N111.6b, a position he still maintained three years after in 2002, but with an addition that the arrears announced three years earlier were almost liquidated. But Engr. Funso Kupolokun, the man who took over from Gaius-Obaseki, said the same about the cash call arrears, but with a little difference that the amount Obasanjo inherited was just $.2b away from (that is, higher) than what his brother in NNPC leadership told Nigerians earlier.

But others who have insight into what the figures were had put the lie to this claim, as just another grand style to build a platform for rip-off of the state. The insiders argue that the real cash call arrears was $978m. No matter the disparity in cash arrears, the Petroleum Ministry still went ahead and paid $2.053b between 1999 and 2003, being cash deducted from all manner of government purses here and there.

There was a correspondence between NNPC/NAPIMS dated September 25, 2000, reference number NAP/GME/FCC/99ARA “which purportedly paid 1999 cash call arrears of $270,448,000. It was real fraud and illegality put together because the documents of the JVCs and their cash calls have contrary details and figures”.

“On NNPC internal memo Re. NAP/FIN.JIA, Arr2 of January 7, 2002 from GGM (NAPIMS) to GED (E&P) titled ‘Settlement of Pre 2000 arrears second payment January 2002’, the pre 1999 arrears was stated as $266,338,000 and $60,514,601,000. Based on the exchange rate of N113,35/$1 identified on the memo, the pre-1999 cash call arrears would be $800.211m, and not $1.0b or $1.2b as claimed by Gaius-Obaseki and Kupolokun”.
These are just the tip of the iceberg and a scratch on what the House probe would handle and sort out.

Rip-off from overseas
About two or three years ago, Saturday Sun broke the story of how the NNPC had fleeced Nigeria of billions of dollars through a curious earning repatriation regime that was as phoney as it was fraudulent.
The practice then was that the corporation, rather than using its own an offshore accounts, preferred to route much of its earnings overseas through a clique of cronies, politicians and all manner of commission-middle men.

Monies accruing to the commission which were expected to be returned to the country were paid into the accounts of these cronies and fronts, who would then pay the corporation the Naira ‘equivalent’ in Nigeria.
Curious as this arrangement seemed, but it would not have raised any eyebrows if the corporation and the middlemen had not introduced a dizzying twist to it all. At a time that the prevailing exchange rate was about N120.00 to the Dollar, the middlemen, in paying NNPC the Naira equivalent of the deposited fund, used the mutually agreed exchange rate of N80.00 to the Dollar. What this means was that for every one million dollar NNPC repatriated into the country through this arrangement, Nigeria lost N40 million.

Now, giving that the amounts involved run into tens of billions of dollars every month, the total value of the rip-off is better imagined.
But the corporation soon rose to its own defence; denying some, confirming some, explaining some and refusing to talk about others. In an era when it was accountable only to the president (who flew off the handle anytime there was a move to look at the books of the NNPC), the much that was offered by the corporation – by way of explanation – was even considered generous. In other instances, it would simple ignore the country. Not even the Federal Executive Council in the Obasanjo administration could get the then president discuss the issue of NNPC. It was Vice President Atiku Abubakar who at one time revealed that the issue of NNPC and the finances of the petroleum ministry were never discussed at FEC meetings in nearly eight years, even after Obasanjo succumbed to pressure to appoint a petroleum minister.
That is probably the reason many see the recent move of the House to probe the NNPC as a direct probe of Obasanjo.

More frauds
Looking atNNPC books is only one aspect of the investigation, but is hardly the bulk of the sleaze of the oil business of government.
A SATURDAY SUN source revealed that there’s a serious sleaze perpetrated by the officials of the oil industry regulatory agency, the Directorate of Petroleum Resources (D.P.R). With the connivance of the D.P.R officials multinational oil corporation take a lot more than their agreed quota at the various oil terminals in the Niger-Delta. In the industry parlance, this is known as “topping” – that’s taking more than the officially stipulated barrels of crude oil at the terminals.
Oftentimes, the excess is gotten at sometime less than half the official price. And payment for that is shared by the conniving DPR people it never gets to government coffers, and it is almost a daily occurrence.
After that, there is also the sleaze of NAPIMS and its upstream deals. NAPIMS is actually believed to be the real cash pot.

Not the old game
In 2003, after Gaius-Obaseki had left office, the then House of Representatives announced that about N320b belonging to the NNPC was not accounted for.
The din was so loud in the House that it promised to investigate the deal and tell Nigerians what actually went wrong about the money. The talk ended the way it arose and nothing more was said or heard.
Nigerians in their hide-outs believed, rightly or otherwise, that it is possible the House members were intimidated to drop the call or were ‘settled’, especially as the money was rumoured to have financed the 2003 PDP presidential election campaign.

Another bogey probe threat by the House was on a certain failed bank that has been leaning on the courts to get revived. We heard that after a probe threat then, the owners of the bank allegedly settled six members of the House whose monies were trapped in the bank. That brought an end to the probe agitation, and the rest of Nigerians who lost their life earnings went home to die in helplessness.
We sincerely hope the probe this time about NNPC will make Nigerians feel proud of a new House of Representatives.

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Comments (23)

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robloxian(Bangor, Maine, US)says...

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