Senate to Probe Baru over $24bn Contract Awards, Insubordination

•  Industry experts blame Buhari’s retention of oil portfolio for feud between Kachikwu and NNPC boss

Damilola Oyedele and Chineme Okafor in Abuja

Following the dust raised over the letter written by the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, to President Muhammadu Buhari, in which he accused the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, of illicit contract awards to the tune of $24 billion and insubordination, the Senate Wednesday constituted a nine-man ad hoc committee to probe the allegations made against the NNPC boss.

The committee is to be chaired by Aliyu Wamako, while its members include Tayo Alasoadura, Akpan Bassey, Samuel Anyanwu and Ahmed Ogembe.

Others are Chukwuka Utazi, Rose Oko, Baba Garba and Kabir Marafa.
The committee was also mandated to undertake a holistic investigation into the finances of the corporation.
The resolution followed a motion by Senator Anyanwu who called for an investigation into the allegations made by Kachikwu.

The minister in the letter had accused Baru of failing to adhere to due process in the award of several multibillion dollar contracts and of sidelining the board of NNPC, which Kachikwu chairs, in the award of contracts.

Kachikwu further accused Baru of undermining his authority and appointing senior executives of NNPC without his input and board approval.

In his motion, Anyanwu also emphasised the need for the Senate to investigate Baru’s involvement in the alleged corrupt activities of Duke Oil, a component of the NNPC Trading Limited, noting that the company was incorporated in 1989 in Panama and therefore does not pay tax in Nigeria.

He said the company enjoys the massive support of NNPC in crude oil trading in the international market in spite of grappling with the basics of what it was registered to do.

Anyanwu further drew the attention of the Senate to the fact that NNPC Trading Limited is a joint venture subsidiary, which has Duke Oil, Hyson/Carlson (JV), NAP Oil (JV), and West Africa-Gas LTD (JV) as shareholders.

“The Senate is aware that Duke Oil, which was incorporated in Panama in 1989 and does not pay tax in Nigeria, is still grappling with the basics of what it is registered to do in spite of the support from the NNPC,” he said.
“We are aware of the decision by the current GMD to allocate almost all crude oil lifting to Duke Oil; this is in addition to its automatic inclusion in the lifting of crude oil, gas, etc, which will make Duke Oil a money-spinning outfit that is accountable only to NNPC,” the lawmaker added.

Anyanwu, speaking further, said Duke Oil is the sole importer of diesel for the Pipelines and Petroleum Marketing Company (PPMC) and NNPC Retail – both wholly owned NNPC subsidiaries – but the company (Duke Oil) executes the contracts through third parties since it cannot import the product by itself.
This, the lawmaker added, had impeded the growth of indigenous companies who are trying to make inroads into the sector.
“The Senate is also aware of the general lack of transparency and level playing field in favour of Duke Oil to lift products without payment, as against its competitors in the sector.

“We are further aware that these have combined to make Duke Oil the highest money earner and at the same time the highest money ‘waster’ because of the massive corruption in the way and manner they transact business.
“The Senate is concerned that this relationship has helped to greatly stifle the growth of indigenous companies operating in the sector. Duke Oil lacks the requisite credentials to trade internationally; it therefore makes Duke Oil a giant commissioned agent only.

“We are also concerned that the net effect of the above arrangement is that NNPC and by extension Nigeria earns less than it would have if the process was open and transparent, where products are sold directly to indigenous oil traders.

“The Senate is further concerned that money so far earned by NNPC Trading Limited through its subsidiaries such as Duke Oil is not made public and is only known by NNPC officials,” Anyanwu said.
Contributing to the motion, Senator Yusuf Abubakar Yusuf noted that NNPC has always acted like it is a law onto itself and was not accountable to any authority.

“NNPC for the past 10 to 15 years has lived above everybody in this country. They think they are a government to themselves and we have to take the bull by the horn. Since we want to fight corruption, we must fight corruption in its totality. And I suggest we include comprehensive investigation of NNPC,” he said.

The Chairman of the Committee on Petroleum (Downstream), Senator Kabiru Marafa, further noted that the Senate could not afford to gloss over the issues raised in the leaked memo.

Presiding, Senate President Bukola Saraki urged the committee to ensure its investigation is thorough.
“This committee should take these issues seriously. They are matters that really go to the root of what we have committed to Nigerians, which is stamping out corruption.

“And they must be investigated and the reports brought back to us as soon as possible. We hope that the quality of the report will continue to meet the standards we have set in this 8th Senate,” Saraki said.

In addition to the Senate’s reaction to Kachikwu’s memo, oil industry experts Wednesday blamed the feud between the minister and Baru on the ambiguity in the line of authority created by Buhari’s retention of the petroleum ministry portfolio.

When he inaugurated his cabinet in November 2015, Buhari retained the post of Minister of Petroleum Resources, while naming Kachikwu minister of state and chairman of the NNPC board.

However, experts who spoke to THISDAY on Kachikwu’s memo said that the development had led to uncertainty over who was actually in control and is the approving authority in the ministry and the industry at large.
Some of the experts who spoke to THISDAY, albeit off the record, warned that the development could impede the reforms initiated in the oil and gas sector by the government.

They equally noted that the credibility of the government was at stake before the international investment community which it has constantly tried to convince that transparency and due process are at the heart of its reforms in the country’s oil sector.

A former President of the Nigerian Association for Energy Economics (NAEE) and professor of energy at the University of Ibadan, Prof. Adeola Adenikinju, said over the phone that Kachikwu’s memo to Buhari projected a big division not just between the ministry and NNPC but also within the ministry which the president needs to quickly address.

Adenikinju opined that if Baru was guilty of the allegations levelled against him by Kachikwu in the letter, then it would be appropriate for Buhari to clearly define the line of authority to prevent such divisions in the future.
“This shows that there is a big division in the ministry, and that the line of authority is not very clear, which perhaps makes the GMD go to the president and not the board.

“The president has to clear this uncertainty because investors will obviously run away if they find that they don’t know where the locus of power is, or who is clearly in charge,” said Adenikinju.

He added: “I think that what the minister is calling for and which he stated in his letter was that the board has its responsibilities, and that it should be respected.

“But without looking at the board or going straight to the president for approvals means that there is no clear delineation of authority,” he pointed out.