EPIC FAILURE OF THE DAY.....NNPC IS BROKE????

The Minister of state for finance, Remi Babalola. Photo: SUNDAY ADEDEJI

NNPC is broke, says finance minister

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The Nigerian National Petroleum Corporation (NNPC) may not be able to pay up its debts as a result of cash flow problems, the Minister of State for Finance, Remi Babalola, said at the weekend in Abuja.

Mr. Babalola, who was speaking with journalists during a workshop on ‘Understanding the operations of the Oil and Gas Industry in Nigeria" organised by the NNPC for members of the Federation Account Allocation Committee (FAAC), said the only reason the corporation has not paid the N450 billion debt owed to the federal government was "its cash flow problem."

He said: "We (the FAAC) do not have a problem with the NNPC. There would be a problem if the debtor said he does not agree it was owing. But, this is a debtor that has owned up, and has even spoken that there is no debate about the fact that it is owing N450 billion. So, where then is the problem? The problem now, however, is about their cash flow situation, and how they would be able to pay back the money. That is a different ball game altogether."

Asked why he claimed there was no problem when the NNPC has consistently refused to either pay up the debt nor provide a schedule on when and how the repayment would be done, despite several demands by the committee, Mr. Babalola said, "I know for a fact that the way NNPC is as at today, they do not have the cash flow to pay the debt. There is no doubt in my mind about that.

"First, what we tried to do was to make them acknowledge that they are owing; which we have succeeded to establish that they are owing. That is a good step forward. How are they going to pay? There are so many ways they can pay. It is just like when Nigeria was owing over $30billion. They can even borrow to be able to pay."

When asked to speak on why the Committee, which is composed of Commissioners of Finance and Accountant Generals of the 36 States of the Federation and the Federal Capital Territory (FCT), had to allow the debt accumulate to over N450 billion, the minister pointed out that "it was a long term thing," assuring that the government would ensure that it does not happen again.

On what government is doing to stop the NNPC from continuing with the practice of always deducting subsidy (petroleum products imports) from revenues meant to be transferred to the Federation Account, Mr. Babalola said a structure is being worked out to take care of that.

"I think we (FAAC) also don't want to create something that would cause confusion in the supply chain. We would work out an arrangement whereby before they can make any withdrawal, they would need to actually go through the PPPRA (Petroleum Products Pricing Regulatory Agency) to make sure that we are comfortable with the auditing."

Discrepancies in accounts

Last year, following the huge discrepancies discovered in the accounts of the NNPC, its management was asked to appear before the FAAC for a proper reconciliation of its books after it claimed that the debt was as a result of deductions for payments of joint venture cash call, as well as subsidies for importation and supply of petroleum products.

After refusing to honour the invitation on several occasions, FAAC, during its meeting last December, expressed strong reservations for the corporation's behaviour, issuing an ultimatum to its Group Managing Director, Mohammed Barkindo, to furnish it with the framework detailing the repayment schedule.

Workshop in place of repayment plan

Rather than provide the schedule during the committee's meeting early this month, NEXT gathered that the NNPC management offered to sponsor a workshop that would help educate members on the operations of the nation's oil and gas industry.

The Minister of Petroleum Resources, Rilwanu Lukman, described the workshop as critical arguing it would help to increase the understanding of stakeholders on the oil industry, remove the doubt and suspicion as well as facilitate better service delivery.

In a 81-page presentation on "Upstream Contract Arrangements & Fiscal Regimes", the General Manager, Planning, National Petroleum Investments Management Services (NAPIMS), Victor Briggs, took participants through the operational processes in the nation's oil and gas industry, particularly on the compositions of operating and investment costs as well as how revenue accrue to the Federation Account from industry operations.

Mr. Briggs, who also spoke on the importance of the Petroleum Industry Bill (PIB), said the inability to maintain industry funding level would imperil the funds available to FAAC in the short, medium and long term.

"Country's growth aspiration which is hinged on a significant contribution from JV oil and gas production volumes will not be attained. Government Revenues will be significantly improved by the passage of the proposed Petroleum Industry Bill (PIB)," he said.

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