Reforming NNPC: NRGI report

The Natural Resource Governance Institute (NRGI) recently released a report which provides an insight into Nigeria’s National Oil Company (NNPC) oil sales. This report reveals the various ways NNPC has mismanaged Nigeria’s main revenue stream. It also reveals how unaccountable NNPC has been in the management of Nigeria’s oil revenues. The report makes interesting recommendations on reforming the operations of NNPC that would ensure more transparency and enable Nigeria manage its oil wealth prudently.

Key Issues and Recommendation from the report

Issue	Recommendation
Domestic Crude Allocation	Eliminate Domestic Crude Allocation
Revenue retention by NNPC and its subsidiaries	Government should develop  clear revenue collection framework to control discretionary spending by NNPC
Oil for Product Swap Agreements	Oil for Products Swap Agreement should be phased out. Future swap deals should be competitively awarded refined product exchange agreements with stronger terms
The abundance of middle men	NNPC should stop the sale of oil to unqualified companies both Nigerian and Foreign and improve its due diligence
Corporate Governance, Oversight and Transparency	Government should lead a programme of transparency and accountability in NNPC and empower scrutiny by oversight actors

Click to view NRGI full report

In addition to the recommendations made in the NRGI report, the new government should consider the following to enhance transparency and accountability in NNPC’s operations:

• The process for allocating oil blocs should be made clear and more transparent
• The names of those awarded oil blocs licenses should be made publicly available
• Oil contract terms and conditions should be made publicly available.
• The representation on NNPC board should be broadened to include key oversight institutions such as CBN, Ministry of Finance, Federal Inland Revenue Service as well as representatives from credible civil society organisations
• It should be compelled to publish full independently audited accounts annually and required to answer questions from its shareholders, the Nigerian People.
•  NNPC should adhere strictly to the Freedom of Information legislation and respond to any queries from the public on their operations.

The Nigerian government has started taking steps to reform NNPC. It has dissolved the NNPC Board, appointed a new Group Managing Director and sacked all the group executive directors. There are plans to split NNPC operations into two (investment and regulator arm).  The NRGI report makes good recommendations which the new government should consider implementing. The new GMD has a great task ahead. He should implement these reforms that will save Nigeria’s oil revenues from being lost to corruption and other wasteful practices.