CBN Governor, Lamido Sanusi
Long
before his shocking letter to President Goodluck Jonathan exposing
massive diversion of government oil revenues became public December
2013, Nigeria’s Central Bank Governor, Sanusi Lamido Sanusi, said he did
what many have accused him of failing to do: acting early as the losses
escalated.
Accompanied by all of CBN’s deputy
governors sometime in 2010, he said he drove to the Nigerian National
Petroleum Corporation, NNPC, to ask for an answer to a simple math: why
Nigeria’s reserves had failed to rise in the face of unprecedented high
oil prices internationally.
Mr. Sanusi said NNPC official lectured
his team that the trouble arose because much of Nigeria’s oil production
came from deep offshore wells; and that the Sani Abacha government had
scandalously agreed with oil companies to peg such oil earnings at $10
dollar per barrel — the prevailing price at the time. The arrangement
was fixed to run for 30 years.
Officials of the corporation explained
that only the Petroleum Industry Bill, PIB, the voluminous
government-sponsored oil sector reform legislation, could reverse that
agreement, according to the governor.
Download Mr. Sanusi’s full memo to the Senate Committee on Finance here.
But while he obtained a legal opinion
from a Senior Advocate of Nigeria, SAN, debunking that claim and
demonstrating the contract can be re-negotiated without the PIB, Mr.
Sanusi said he and his colleagues however shifted focus to other
possible avenues of revenue leakages.
In the years that followed, they
established how government fuel subsidy had been massively abused, and
how the Pipelines and Product Marketing Company, PPMC, had sustained a
notorious racketeering in the administration of the government’s oil
swap deals- an arrangement in which Nigeria gives out crude oil to
foreign companies in exchange for refined product.
“For example, companies in swap
agreements with PPMC would lift crude oil for free, sell at the
international market, repatriate the funds and sell at the autonomous
rate, trade with the proceeds and at their own time, establish letters
of credit (LCs) to import PMS using the funds purchased at the official
window.”
In one shocking revelation, the PPMC
signed oil swap agreements with companies with a clause allowing the
destruction of vital documents after one year. Mr. Sanusi called the
clause “troubling”, and said on account of that, he did not believe an
ongoing, but separate attempt by the National Assembly to probe the swap
deals, will yield any result.
At multiple meetings with lawmakers, the
CBN governor said he raised the alarm on the findings, particularly
about the subsidy fraud, long before the House of Representatives and
the federal government finally, in 2012, launched investigations that
proved grounding fraud in excess of N2 trillion.
But Mr. Sanusi’s biggest haul yet as
part of his team’s investigation, is his allegation that the NNPC,
Nigeria’s state-run oil behemoth, has for years, illegally diverted
several billions of dollars of oil revenues to unknown accounts, through
a systematic practice that defrauded the nation of over 70 per cent of
its due oil proceeds.
The scandal, first exposed in his first
letter to Mr. Jonathan, has shocked Nigerians, but has barely received
sufficient action from the government.
On Tuesday, at a meeting of the Senate
Finance Committee which is probing the missing funds, Mr. Sanusi revised
his earlier claim that nearly $50 billion was missing, and insisted
that while part of that amount had been accounted for, as much as $20
billion (N3.3 trillion) – more than half of Nigeria’s entire budget this
year- remains unaccounted for.
The ministry of finance and the NNPC
claim unreconciled amount stands at $10.8 billion, while, the NNPC
claims the outstanding $10.8 billion was paid out as subsidy on kerosene
and petrol, and the balance was used for pipeline maintenance.
But Mr. Sanusi’s submissions to the
Senate committee, obtained by PREMIUM TIMES, offer a firm argument on
why the $10.8 billion claim is untenable, and challenges the NNPC’s
claim that the outstanding $10.8 billion was used as purported.
Subsidy fraud
While the government, as well as the
CBN, have admitted the total crude oil lifting from January 2012 to June
2013, stood at $67 billion, Mr. Sanusi said only $47 billion of that
amount was paid into government coffers.
According to the CBN, the $67 billion is
made up of $14 billion for the Federation; $15 billion for the Federal
Inland Revenue Services, FIRS; $2 billion for the Department of
Petroleum Resources, DPR; $28 billion for Domestic Crude; $2 billion for
Third Party financing; and $2 billion for the Nigerian Petroleum
Development Company, NPDC.
Of that total, the CBN said only $47 billion had been paid into the government’s account, leaving a balance of $20 billion.
Mr. Sanusi said the NNPC’s claim that 80
percent of the $10.8 billion was incurred on petrol and kerosene
subsidy should not be accepted since a presidential directive had in
2009 barred payment of subsidy on kerosene.
The directive, from former President
Umar Yar’adua, remained in force long after the president’s death, Mr.
Sanusi said, citing a letter to him from the Petroleum Products Pricing
Regulatory Agency, PPPRA, in December 2010- long after Mr. Yar’adua’s
death- which confirmed that the agency had “ceased to grant subsidy on
HHK(kerosene) through a presidential directive since July 2009”.
“This may explain why NNPC waited till
2011 to claim its ‘arrears’ for 2009-2011,” Mr. Sanusi wrote. “So the
first question here is: on what basis did NNPC pay itself billions of
dollars as ‘subsidy’ for kerosene, in view of this directive.”
On petrol subsidy, the CBN governor said
documents showed the NNPC did not make any deductions from the domestic
crude sales for subsidy payment between April 2012 and 2013. In the
document attached as appendix, the row showing “adjustment for subsidy”
consistently shows “NIL” within the period.
Mr. Sanusi said there are two
possibilities here: either the NNPC was lying to the government that it
was not making deductions, or it is now lying that is made when it never
did.
“Either way, this shows we cannot trust NNPC or its management to tell us the truth,” he said.
Phoney companies sharing the booty
Part of the missing $20 billion, is a $6
billion worth of crude which the NNPC said it lifted on behalf of the
NPDC, the upstream operating arm of the NNPC. Mr. Sanusi said the amount
involved should constitutionally belong to the federation account by
has been methodically diverted into private hands.
The two companies involved are Seven
Energy and Atlantic Energy. The CBN said it found out the two companies
are owned secretly by the same persons. The companies were meant to act
as financial and technical partners to NPDC in respect of the
development of eight oil blocks sold by Shell Petroleum to indigenous
companies.
In the end, Mr. Sanusi said the bank
found out the companies did not provide any funding beyond using their
affiliation to the oil titles to obtain loans from Nigerian banks. But
when it came to oil proceeds, they were entitled to all of the earnings,
based on a fraudulent agreement the companies signed with the NPDC,
with the approval of the NNPC.
Mr. Sanusi said details of the entire
transaction has remained secretive, and no one exactly knows how much
the companies make. But earnings that go the private companies should
ordinarily belong to the government.
In the voluminous submissions, Mr.
Sanusi said he believed his effort was already yielding results as the
NNPC, which has denied for years withholding government funds, had
admitted this time to the tune of $10.8 billion.
“Before I wrote my letter to the
president in September, 2013, there had been several allegations against
NNPC for non-remittance of funds to the federation account,” he said.
“NEITI had raised the issue in its various reports. The KPMG audit
ordered by Minister Aganga when he was in the finance ministry had
raised the same issues.”
“The Nuhu Ribadu committee set up by
Petroleum Minister Allison-Madueke also made the same claims. It is also
a regular subject of dispute between NNPC and FAAC.
“NNPC dismisses all such allegations as
false and spurious, and claims in fact that the federation owes it
money. In a sense, we have made progress since NNPC has now for the
first time acknowledged that it did not remit to the federation a sum of
$10.8 billion and has gone public with an attempt to render account.”
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