Araraume’s Case: Concerns Over NNPCL/Gas Operations

Sani Yusuf

Those who appear to be benefiting from the illegality may not admit the current crisis enveloping the Nigerian National Petroleum Company Limited (NNPCL). But both foreign and local contractors and investors – who have entered into businesses –running into billions of dollars with the company in the last few months, are apprehensive over the faith of the businesses.

The investors’ apprehension may be predicated on the recent profound judgement by Justice Justice Inyang Ekwo of a Federal High Court in Abuja, who declared the removal of Senator Ifeanyi Araraume as the Non-Executive Chairman of the Board of the Nigerian National Petroleum Company Limited (NNPC Ltd) as illegal.

The court had when further to nullify and set aside all decisions and resolutions of the board of the NNPCL made in the absence of Araraume, from January 17 till date. And awarded Araraume the sum of N5 billion being damages for his wrong removal, disruption and interruption of the term of his office – as the non-executive chairman of the NNPCL. The judgement has been served to all the defendants.

The huge implication is that every business entered into by NNPCL, which insider put at ‘’billions of dollars’’ in the past seven months, is illegal. So, one may understand the increasing concerns by stakeholders in the oil/ gas sector, especially from the international community. Even though we have been told that Mrs Margret Okadigbo, whose tenure was recently declared illegal, has stopped presiding over the board meeting since the verdict of the Federal High Court, the board has not been able to meet due to the inaction – the seemingly refusal of the federal government and the management of the NNPCL to give effect to the judgement that restored Araraume as the legally recognized Chairman of the Board. Crucial decisions that the board ought to have taken in the past few weeks are at a standstill.

Of a great concern, according to insiders, is the Korean construction company Daewoo Engineering & Construction, which recently secured a $741 million contract with the NNPCL to rehabilitate the 110,000 barrel per day (bpd) Kaduna Refinery.

In line with agreement – the terms of the quick-fix repair contract, Daewoo was expected to be responsible for restoring production at the facility to 60% of its total capacity by 2024, thereby significantly improving fuel security in the West African nation. The project was expected to be executed in three work packages as a maintenance services contract by Daewoo E&C Nigeria Limited, at an estimated maximum cost ceiling with a duration of 21 months.

The award of the huge contract followed a Memorandum of Understanding (MoU) signed between the Okadigbo-led board of NNPCL that has been declared illegal, and the foreign contractor late last year.

Experts had welcomed the contract, stating that restoring the refinery back to operation would guarantee energy security for the country, reduce dependence on imported petroleum products in view of near total dependence on supply of imported petroleum products and the impact the ongoing Russia-Ukraine war is having on global supply.

However, the refusal or failure by President Muhammadu Buhari, who created the mess in the first place, to resolve the issue is sending a wrong signal to the company. The outgoing President was quoted as saying recently that ‘’due judicial process’’ would be followed in resolving the problem; But almost three weeks after that statement, there seems not to be concrete step taking to give effect to the judgement.

There were media reports recently that the NNPCL had received ‘’hundreds of telephone calls’’, especially from the international community, wanting to know how the company intended to resolve the matter. The near consensus among the stakeholders, according to the report, ‘’is the stability and solidity of the NNPCL at this time of uncertainty in the oil global market.’’

Justice Ekwo in a judgment recently held that Araraume’s removal by Buhari flouted provisions of the NNPC Ltd laws; as well as the Company’s and Allied Matters Act. Justice Ekwo had declared that the office and position of Araraume as chairman of the NNPCL are exclusively governed and regulated by the Companies and Allied Matters Act, 2020 and the Memorandum and Articles of Association of the NNPCL.

In the judgement described by many senior lawyers as ‘’thorough and profound’’, the judge also declared that by the provision of section 63 (3) of the Petroleum Industry Act 2021, Buhari cannot lawfully remove Araraume as the chairman of NNPCL for any reason whatsoever  – outside the conditions specifically listed in the said Section 63 (3) of the PIA, 2021.

He therefore, nullified and set aside all decisions and resolutions of the board of the NNPCL made in the absence of Araraume, from January 17 till date; and Araraume the sum of N5billion damages for his wrong removal.

Apparently worried about the ‘’unpredicted impunity’’ by the presidency and the likely effect on his image, Ararume had last year dragged Buhari and the NNPCL to court over his illegal removal as the Chairman of the Board of the NNPC Ltd. He had demanded enormous sum of N100 billion as damages caused him due to the unlawful manner he was removed as Board Chairman after his name was used to incorporate the entity.

The Secretary to the Government of the Federation, acting on the instruction of the President, had withdrawn Araraume’s appointment without any reason whatsoever. The suit marked FHC/ABJ/CS/691/2022 was instituted on his behalf by a group of Senior Advocates of Nigeria (SANs) comprising Chief Chris Uche, Ahmed Raji, Mahmud Magaji, Ogwu James Onoja, K.C Nwufor and Gordy Uche.

Delivering judgement in the suit after dismissing a total of seven-application against its hearing, Justice Ekwo held that the case of the plaintiff had merit and subsequently ruled in his favour.

Ekwo also dismissed the claim of the NNPC Ltd that Araraume was removed because he was not qualified, involved in alleged contract fraud, amongst others, noting that no evidence of such was contained in the January 17 letter, for his withdrawal. According to the judge the defence by the NNPCL was an exercise in futility at manufacturing reasons for Araraume’s removal.

The judge held that the removal of Araraume without fair hearing by the president was, “wrong and cannot be tolerated by a court of law.’’  Justice Ekwo also held that the plaintiff having proved his case was entitled to damages.

The court also ruled that the president’s letter of January 17, without complying with the NNPCL’s and CAMA laws, “is wrongful, illegal, null and void and of no consequence and is hereby set aside.’’

Araraume had in his suit, articulated four issues for determination by the court: which was whether in view of the provisions of the Memorandum and Articles of Association of the NNPC, Companies and Allied Matters Act 2010 and the Petroleum Industry Act 2021, the office of the non-Executive Chairman is not governed and regulated by the stated provisions of the law.

He had also asked the court to determine whether by the interpretation of Section 63 (3) of the Petroleum Industry Act 2021, the president could lawfully remove him as non-Executive Chairman of the NNPC for any reason outside the provisions of the law.

The Imo politician had also asked the court to determine whether Buhari could sack him without compliance with expressly stated provisions of the Articles of Memorandum of Association of the Company, section 63 (3) of the PIA Act 2021 and section 288 of the CAMA Act 2020. Also listed for determination was whether his purported removal vide letter of January 17, 2022 without compliance with expressly stated provisions of the law is not wrongful, illegal, null and void and of no legal consequence whatsoever.

Upon the determination of the issues in his favour, the plaintiff had wanted the court to make declaration that his position as non-Executive Chairman of the NNPC was exclusively governed and regulated by CAMA 2020, PIA Act 2021 and Memorandum of Association of the Company.

He had also sought a declaration that by the provisions of section 63 (3) of the PIA Act, CAMA Act and Memorandum of Association of the NNPC, the President cannot by will remove him from office as non-Executive Chairman without following due process of the law.

He had requested for N100 billion as damages for the wrongful removal, disruption and interruption of his term of office as non-Executive Chairman of the NNPC.

No doubt, Araraume’s case has created a huge disruption in the oil sector, especially with billions of dollars contracts awarded in the absence of the plaintiff as the non-executive chairman of the NNPCL, which the court declared as nullity recently. Before the profound judgement by Justice Ekwo, legal and energy experts had expressed concerns over the unwarranted political interference in the NNPCL by the presidency – which they said ought to have been governed and regulated by the Companies and Allied Matters law and the PIA, 2021. 

Even though, the President may have actually realized his mistakes in the removal of Senator Ifeanyi Araraume before now – as efforts were made to persuade him to resign and be rewarded with oil blocs; but he was said to have turned down the request, telling the representatives of the government angrily that his name was more important than any oil bloc.

Going by the various comments by experts in the oil sector, appealing the judgement right now will create more crises for the oil sector; and there ought to have been necessary, lawful steps to correct the mistakes.  The earlier the urgent step is taken, the better for the industry.

Yusuf, a journalist,  wrote from Asokoro, Abuja