Corporate Governance, NNPC and Law Reform

Need for Law Reform

By now, it is patently obvious to all, that the National Assembly needs firstly, to undergo a rigorous exercise of reviewing all the existing laws in Nigeria. Some of the laws are extinct, while many of them (even sometimes on the same subject-matter) not only contradict themselves, but are also inconsistent with the 1999 Constitution of the Federal Republic of Nigeria (as amended in 2010)(the Constitution). Secondly, there is a bevy of outstanding Bills lying down in the National Assembly, waiting to be considered and passed.

Be that as it may, Nigeria is still not suffering from any acute shortage of laws. The issue is that many of our laws are ignored, they are not enforced, talk less of being obeyed. Recently, I gave the example of the laws governing Bigamy, and how in Nigeria, they are shrugged off, and flouted with ‘gusto and aplomb’.
However, it is a cause for concern, when Government and its agencies, incessantly disregard laws, manipulate and misinterprete laws to suit their own purposes, and defy them as a matter of course. Should they not lead by example?

The NNPC Saga

Recently, the new saga that has been in the frontline, is that of the leaked letter purportedly written by the Minister of State of Petroleum Resources to President Buhari, containing allegations of infractions by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC/the Corporation), ranging from the recent appointment of staff (which far from reflect federal character) and award of contracts to the tune of $24 billion, without prior Board Review and Approval.

The NNPC Act

Section 4(1) of the Nigerian National Petroleum Act 2004 (NNPC Act) does permit the Corporation to employ staff that it deems necessary. However, Section 1(2) of the NNPC Act clearly provides that the affairs of the Corporation shall be conducted by its Board of Directors, and I would imagine that this includes key staff appointments and promotions, securing of loans, award of contracts certainly to the tune of $24 billion, and the like (though the Vice President has subsequently stated that they were loans not contracts). The last time I checked the major role of a Board of Directors of an organisation, is to direct its activities and be accountable to its shareholders and stakeholders.

Section 3(1) of the NNPC Act provides for the appointment of the Managing Director of the Corporation to be “responsible for the execution of the policy of the Corporation and the day-to-day running of the Corporation’s activities and its associated services”. Execute which policy? Those decided by the Federal Government, and fashioned out/practicalised by the NNPC Board. I cannot also imagine that, whether loan or contract, transactions worth over $20 billion, can be classified as day-to-day activities! This is an astronomical amount, too much for Dr Baru who doubles as the Chairman of the NNPC Tenders Board, to take on without his Board, because such amounts would comfortably fall into the category of policy.

The first schedule to the NNPC Act Part A Section 4, expressly provides that decisions of the Corporation shall be taken in accordance with Section 27 of the Interpretation Act (Section 27(1)(a) & (b)), which in turn provides for decisions of a body to be made by a majority or quorum, and the person presiding over the meeting having the casting vote. Reading the Interpretation Act into the NNPC Act, it means that NNPC decisions, must be deliberated and agreed upon at Board level, before going out for requisite approval.

It therefore goes without saying, that whether it is key staff appointments or award of contracts, or loans of a huge magnitude, by virtue of the NNPC Act, there should have been Board Approval prior to obtaining approval from the Federal Executive Council or the President.

Breach of the 1999 Constitution

Section 14(3) of the 1999 Constitution (I keep having to refer to it and regurgitate its provisions, since it seems to be often overlooked by Government when appointments are being made), provides that composition of Government and its agencies, must reflect federal character, and there should be no predominance of persons from a few States or a few ethnic groups. It is therefore, shocking to say the least, that someone of the stature of Group Managing Director of NNPC would leapfrog his Board of Directors, disregard the provisions of the 1999 Constitution, and insensitively make such lopsided appointments, glaringly favouring the Northern Section of the country, while totally excluding the South East Zone, amidst all the present agitations going on in the country. Such actions can only incense not just the agitators, but many Nigerians, and pitch them against the Government. One even wonders whether the Federal Character Commission which has the mandate to give effect to Sections 14(3) & (4) of the 1999 Constitution, still exists. It seems that the recent NNPC staff appointments in any event, are unconstitutional, going by the foregoing constitutional provisions.

NNPC’s Response

The submission by NNPC that, ‘the law and the rules do not require a review or discussion with the Minister of State or the NNPC Board on contractual matters’, is in my humble opinion, untenable, as Section 1(2) of the enabling Act of the Corporation, puts the Board in charge of all the affairs of NNPC, without excluding contractual matters. Public Procurement Act 2007 (PP Act) or not, NNPC Tenders Board or not, there is a procedure laid down by Section 1(2) of the NNPC Act, which cannot be by-passed on anybody’s whims and caprices. Or do we just ignore the provisions of the NNPC Act, which establishes and is the enabling law of the Corporation?

Some have fingered the PP Act, as one of the culprits, that has caused the crossed-lines between the Chairman and the Group Managing Director of the NNPC. How so? As far as I’m concerned, the PP Act simply provides the rules that procuring entities should follow for bids, award of contracts and so on, and has the final say in the award of contracts. Nowhere in the PP Act, does it say that the the Federal Executive Council or the President may give the final approval to contracts, nor does it say that the National Council on Public Procurement or the Bureau of Public Procurement, can and will assume and replace the functions of a Board of a procuring entity, which in this case, is the NNPC. The objectives and functions of both bodies, are clearly stated in Sections 2,3,4 & 5 of the PP Act. It seems that the PP Act presumes that the NNPC has done the needful ‘in-house’, before its role kicks in.

Those that see nothing wrong in Dr Baru’s actions, as far as the financial transactions are concerned, say that contracts below a certain amount go to the NNPC Tenders Board, while above a certain amount take another route through the Bureau of Public Procurement. The intendment of the NNPC Act, surely could not be to make the Corporation’s Board redundant? Some elect to see it as a contradiction between different legislation related to the same subject-matter. This may be a good case for interpretation by the Court.