Adefolarin A. Olamilekan
The online and offline news media platforms were awash with the report of the Nigerian National Petroleum Company Limited ( NNPCL) securing $3b emergency loan to strengthen the naira, as a fiscal and monetary stability instrument.
This has prompted many Nigerians seeking clarification since nobody expected NNPCL to engage in a statutory traditional role of monetary function of the apex bank, the Central Bank of Nigeria (CBN).
Nevertheless, according to the media reports, the “NNPC Ltd and AFREXIM Bank jointly signed a commitment letter and Term sheets for an emergency $3 billion crude oil repayment loan”.
The report added that the signing, which took place at AFREXIM bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd support the federal government in its ongoing fiscal and monetary policy reforms aimed at stabilizing the exchange rate market.
Furthermore, the report stated that as conditions for the loan repayment, the NNPCL would do this through crude oil repayment plans.
According to some analysts, this action is a relief coming from the Nigerian National Petroleum Company Limited (NNPCL) and AFREXIM Bank having to help the nation with an emergency $3bn dollars, considering the recent turn of events of the naira suffering serious depreciation with the naira exchanging for N1000 to $1 at the FX market.
This is coupled with the fact that the forex unification policy and much touted CBN I&E Window put in place, as a new monetary regime of the Tinubu administration, failed to save our beloved naira from the murky waters of depreciation.
It is in this light, others have applauded the NNPCL move.
However, for us, it is a critical moment to interrogate this action, having understood the balloon debt profile of N77 trillion of the country, according to the Debt Management Office (DMO) as at April 2023.
An average critical thinking Nigerian may be forced to ask the following questions; what is the role of NNPCL in fiscal policy? How come it is NNPCL that wants to stabilize the depreciating naira? Why would the NNPCL use loan to stabilize the naira? And lastly, why must the NNPCL repay AFREXIM Bank loan in crude oil swap repayment plans?
We need to reiterate the fact that crude oil tops Nigeria’s biggest export and biggest contribution to the nation’s economy. The NNPCL has been the sole manager of the oil and gas sector whereas the Petroleum Industrial Act (2021) was enacted in 2021, to deregulate the sector, bringing on board, two other institutions vis – a- viz Nigerian Upstream Petroleum Regulatory Authority (NUPRA) and Nigerian Midstream and Downstream Petroleum Regulatory Management (NMDPRM).
Interestingly, the PIA brought to the fore, the unbundling of the NNPC into NNPCL as a commercial status, in the sense that the nation can enjoy availability of fuel in the country.
But this has not been so, even as the NNPCL claimed that the nation has a maximum production capacity of 2.5 million per day. Regrettably, this amount has not translated to affordable fuel as Nigerians suffer to get fuel, due to price instability.
Again, the news of the NNPCL emergency $3bn dollars loan has drawn attention to the need to query this misplacement and misgovernnance in our oil and gas sector.
For NNPCL going this far to obtain loans as a measure of “stabilizing” the naira, which, in actual fact is not in it’s jurisdiction of operations, nor it’s mandate but that of the Central Bank of Nigeria (CBN), makes one to wonder what sort of economy we are running.
It also points to the allegation that NNPCL is not interested in ensuring the four national refineries based in Port Harcourt, Warri and Kaduna work, prompting one to ask; what stops the same NNPCL from getting a loan to fix the refineries or probably build a new one?
For us, one thing is obvious about the so called emergency $3bn dollars loan.
This money we know is for NNPCL and oil marketers to import PMS into the country with business as usual.
Meanwhile, the earlier asked questions need us to gaslight into the NNPCL as a state owned oil entity, and our answers can simply be found embedded in the issues of crude oil swap for PMS, debt, corruption and non- transparency of NNPCL.
First is the controversial crude oil swap scheme of NNPCL. NNPCL became the sole importer of PMS, after the Buhari administration declared fuel subsidy a scam, bringing to an end, fuel importation by private oil marketers and others.
Unfortunately, the NNPCL went into crude oil swap for PMS with some major oil marketers that became a controversial scheme, and the head and tail of it was that it became shrouded in deep corruption eventually.
At a point, Nigerians were told it was daily 450,000 of crude meant for the four national refineries NNPCL was swapping with its partners.
Yet, the nation was bleeding under the weight of Premium Motor Spirit (PMS) otherwise known as Petrol importation which stood at N3.97 trillion representing 19% of the total imports and that of subsidy payment gulping an all-time high of N3 trillion between January to June of 2023 budget of N21 83 trillion.
This had aroused anger amongst Nigerians to rationalized that if we are swapping crude oil for PM, where is the subsidy coming from?
Instructively, the debate about subsidy over the years has led the Tinubu government to suspend the fuel subsidy scheme, bringing about increase in fuel prices in Nigeria from N195 per litre since May 2023 to N530 per litre and N620 per litre in August 2023,yet being told that the price is subject to market forces.
Contradictorily, it is this same market forces that is destabilizing and depreciating the naira that NNPCL wants to use loan procurement of $3 billion, shrouded in a very ambiguous crude oil repayment conditions.
Is this not penny wise, pound foolish aprosim on the part of the NNPCL and the Tinubu administration?
How much of crude oil will be equivalent to amount borrowed?
What is the percentage of interest to be calculated on the crude oil, that we can say it is fair deal between NNPCL and AFREXIM bank, and what is the time frame of the loan deal disbursement.?
The second issue is the debt profile of NNPCL that displayed it’s shortcomings, making us to question why this same company is getting into another round of debt. For instance, the NNPC in April 2022 paid a total of $3.68billion out of the $4.689billion cash call debt to five international oil companies that are its joint venture partners.
Meanwhile, the same NNPC between January and November 2021 generated a revenue of N2.992 trillion, failing to meet the projected income of N4.564 trillion during the period in review. This debt owed by the NNPC is paid for from the revenue it makes, despite not meeting its projected revenue.
And after about a year, NNPCL paid into the Federation Allocation Account Committee (FAAC), the sum of N124billion in June 2023. As of today, the same NNPCL is not meeting up with it’s projected revenue, claiming to be under recovery; a technical term to show it has been operating at a loss.
Thirdly, it is corruption in the NNPCL that is making it a magnetic drawback to it succeeding in Nigeria, even though corruption permeates both the private and public sectors.
Corruption is a cankerworm retarding the nation’s development and sadly, that of NNPCL is very much obvious, because Nigerians have never enjoyed the wealth of oil the corporation is saddled to manage for the people except for selected individuals and groups in the country.
Moreover, NNPCL has been enmeshed in corruption scandals which have led to inefficiency and poor governance in the oil and gas sector, that served as the biggest exploration as well as export for the nation’s income.
Lastly, is transparency issue, and on this, the NNPCL compromises when it comes to transparency and accountability.
Painfully, the lack of transparency on the part of the NNPCL to the Nigerian populace and the rest of the world, is one of its problems.
The NNPCL is never forthcoming when it comes to it’s audited accounts; the revenue from oil and gas and how it has been spending same on behalf of the over 200 million Nigerians.
This is a corporation that has been in existence for 45 years, but only managed to publish its first ever audited account in 2020.
Since then till now, it’s yet to release any financial statement for the year ending 2021,2022 and 2023.
NNPCL is modeled around the likes of Saudi Aramco and Petrobras, but unlike NNPCL, they’re well run as they release their audited financial statements year long for analysis by interested foreign investors and stakeholders that need the information in their business destination decision-making process.
We can’t forget the issue of oil theft and pipeline vandalization to daily loss of 150,000 barrels per day. This drawback from the NNPCL do not only affect the economy as millions of dollars are unaccounted for and lost, it irretrievably has a huge impact on Nigeria’s GDP.
Having said that, how can we trust NNPCL that discrepancies becloud its remittance report operations that not even the Auditor-General can unravel.?
And at the same time, NNPCL wants to stabilize the naira, when in reality, it has failed to support local refinery to work so that importation of PMS would drop and the pressure on and demand for dollar will shrink.?
Nigerians need to remind NNPCL under
Group Managing Director (GMD), Mela Kyari that it is not his duty and that of his management team to procure $3billon dollar to strengthen the naira. Rather, his major interest should be on how to fix the four refineries, with two located in Port Harcourt, Warri, and Kaduna, with a combined installed capacity of 445,000 bpd.
This should have been the best option to strengthen the naira and eliminate any form of arbitrary market forces leading to soaring fuel prices and the attendant effects on the economy because Nigerians pay so much for transportation and running of businesses amongst others, despite the abundance of crude in the country.
Critically, in our view, the loan cannot be relied on either at short to medium or short to long term basis.
Rather, it would lead to further disruptions in the forex market in the form of free hot forex, round tripping, insider abuses, speculation and hoarding.
This will happen because NNPCL’s focus is on PMS importation services for oil importers, and it’s not the right fiscal and monetary policy approach that any sound economist or political economist can support to be applied if truly we want the naira strengthened and our foreign exchange market stabilized.
President Tinubu must scrutinize this kind of hasty action by Mela Kyari NNPCL, who expended over N100 billion on Turn Around Maintainance (TAM) of refineries since assuming office in 2019 without any meaningful result.
How then, can he be trusted to strengthen naira by loan proxy?
In conclusion, for us, we are adding our voice to the call on President Tinubu to set up a Presidential Visitation Panel to ascertain the real state of the four national refineries because the December 2023 promised deadline made that one of the refineries in Port Harcourt would work in refining crude for local consumption is less than 130 days.