Alleged $25bn contracts: Reactions as Baru says no role for Kachikwu, NNPC board
The Group Managing Director, Nigerian National Petroleum Corporation, Maikanti Baru, on Monday, declared that it was most unfortunate for the Minister of State for Petroleum Resources, Ibe Kachikwu, to assert that he (Kachikwu) was never involved in the recent Crude Oil Term Contracts.
Kachikwu, who is the Chairman of the NNPC board, in a leaked memo to President Muhammadu Buhari, had alleged that against the rules, Baru awarded major contracts worth $25bn without reviewing or discussing them with him or the corporation’s board.
The legal and procedural requirements are that all contracts above $20m would need to be reviewed and approved by the board of NNPC. Mr. President, in over one year of Mr. Baru’s tenure, no contract has been run through the board.
“As in many cases of things that happen in NNPC these days, I learn of transactions only through publications in the media,” Kachikwu wrote.
But in an official response issued by the NNPC’s Group General Manager, Group Public Affairs Division, Ndu Ughamadu, in Abuja on Monday, the corporation faulted the assertions of the minister, adding that his (Kachikwu’s) recommendations with respect to the Crude Oil Term Contracts were taken by the NNPC management.
The NNPC stated that its reaction was in response to Buhari’s directive to Baru and his team, mandating them to react to the issues raised in the petition by Kachikwu.
Also, on Monday, heavy security presence was sighted at the headquarters of the corporation again with armoured tanks and police patrol vans strategically positioned on roads leading to the national oil firm.
On Friday, there was heavy security presence at the headquarters of the oil firm, as armed policemen and soldiers were sighted at the entrance of the oil firm, while police vans and APC were stationed on both sides of the roads leading to the NNPC.
Ughamadu, however, told one of our correspondents on Monday that the presence of heavy security at the corporation was normal and a routine exercise aimed at adequately securing the country’s oil corporation.
In its official response to Kachikwu’s allegations, the NNPC stated that it was “important to note from the outset 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.”
It added, “What is required is the processing and approval of contracts by the NNPC Tenders Board, the President, in his executive capacity or as Minister of Petroleum, or the Federal Executive Council, as the case may be.
“There are therefore situations where all that is required is the approval of the NNPC Tenders Board while, in other cases, based on the threshold, the award must be submitted for presidential approval. Likewise, in some instances it is FEC’s approval that is required.”
The oil firm stated that the minister exaggerated some of the contract figures he mentioned in his petition to the President.
It said, “It should be noted that for both the Crude Term Contract and the Direct Sale and Direct Purchase agreements, there are no specific values attached to each transaction to warrant the values of $10bn and $5bn respectively placed on them in the claim of Dr. Kachikwu.
“It is therefore inappropriate to attach arbitrary values to the shortlists with the aim of classifying the transactions as contracts above NNPC Tenders Board limit. They are merely the shortlist of prospective off-takers of crude oil and suppliers of petroleum products under agreed terms.”
The corporation said the transactions were not required to be presented as contracts to the board of the NNPC and, of course, the monetary value of any crude oil eventually lifted by any of the companies would go into the Federation Account and not to the company.
It said, “Furthermore, contrary to the assertion of Dr. Kachikwu that he was never involved in the 2017/2018 contracting process for the Crude Oil Term Contracts, Dr. Kachikwu was in fact expressly consulted by the GMD and his recommendations were taken into account in following through the laid down procedure. Thus, for him to turn around and claim that ‘…these major contracts were never reviewed or discussed with me…’ is most unfortunate to say the least.”
The NNPC explained that its contracting process was governed by the provisions of the NNPC Act; Public Procurement Act, 2007; and procurement method and thresholds of application and the composition of Tenders Board as provided by the Secretary to the Government of the Federation Circular reference no. SGF/OP/1/S.3/VIII/57, dated 11th March, 2009.
On approving authority for contracts, the national oil firm said the SGF Circular on procurement threshold explicitly provides that up to N2.7bn ($20m) can be awarded by the NNPC Tenders Board, while it was FEC that had the power to award contract above N2.7bn ($20m).
It said, “The BPP expressly clarified that the NNPC Tenders Board is not the same as the NNPC Board. The governing board (NNPC Board) is responsible for approval of work programmes, corporate plans and budgets, while the NTB is responsible for approval of the day-to-day procurement implementation.
“BPP referred to the SGF circular for the composition of the NTB to compose of the Accounting Officer (GMD NNPC) as the Chairman, with Heads of Department (GEDs) as members with the Head of procurement (GGM SCM) serving as the Secretary of the NNPC Tenders Board.
“The above clarifications of the provisions of the procurement process show that approvals reside within the NTB and where thresholds are exceeded, the NNPC refers to FEC for approval. Therefore, the NNPC Board has no role in contracts approval process as advised by the BPP.
“As can be seen, all these clarifications were sought and obtained prior to August, 2015 and were implemented by Dr. Kachikwu as the GMD of NNPC. Dr. Kachikwu also constituted the first NNPC Tenders Board on September 8, 2015 and continued to chair it until his exit in June, 2016.”
Taking up the issues raised in Kachikwu’s letter one after the other, the NNPC stated that the Crude Oil Term Contract that was valued at over $10bn by the minister was not a contract for the procurement of goods, works or services, but was simply a list of approved off-takers of Nigerian crude oil of all grades.
It said the list did not carry any value, but simply state the terms and conditions for the lifting, adding that it was inappropriate to attach a value to it with the aim of classifying it as contract above management limit.
It stated that in arriving at the off-takers list for 2017/2018 COTC, adverts were placed in national and international print media in October last year, while the bids were publicly opened in the presence of all stakeholders.
It said detailed evaluation was carried out and the shortlist of the successful off-takers was presented to the approving authority (Buhari) for consideration and approval.
“Thereafter, NNPC published the list of the successful off-takers in newspapers and NNPC’s official website. This has been the standard procedure and it is the same process adopted during the 2016/2017 COTC when the Minister of State for Petroleum Resources was the GMD.
“In conclusion, due process has been fully followed in the shortlist of the off-takers of the Nigerian crude oil for the current term 2017/2018,” the corporation added.
It went on to state that like the COTC, the DSDP was not a contract for any procurement of goods, works or services, rather it was simply a list of off-takers of crude oil and suppliers of petroleum products of equivalent value.
The list, it said, did not carry any value, but simply state the terms and conditions for the lifting and supply of petroleum products, adding that it was mischievous to classify it as a contract and attach a value to it, that is above management’s limit.
On the Ajaokuta-Kaduna-Kano Gas Pipeline Contract, NNPC said the project was a contractor financed contract, arguing that due process was followed in the processing of this contract.
On the various financing arrangements considered with international oil companies, the NNPC said these were part of the process of exiting Cash Call approved by the FEC.
The corporation added, “The third party financing option emanates from the appropriation act provisions that allow sourcing of financing outside regular cash call contributions. Upon approval of the calendar year’s operating budget, the NNPC in conjunction with its JV partners commence the necessary process for accessing financing to bridge the funding gap.”
It said Section 8 sub-sections (1) and (4) of the NNPC Act CAP N123 requires that all NNPC borrowings must be approved by Mr. President.
The oil firm said finances taken under this administration were approximately $3bn, adding that all established due process had been observed leading to the securing of financing for projects in 2016/2017.
Of the three projects listed, one was executed by Kachikwu when he was the NNPC GMD, while two were executed by Baru.
SANs, lawyers disagree on Baru reporting to Buhari
But a Senior Advocate of Nigeria, Dr. Olisa Agbakoba, faulted the argument by the NNPC that there was no law requiring recourse to the Minister of State for Petroleum Resources in the award of contracts.
Agbakoba argued that being the Chairman of the NNPC Board, the Minister of State, who supervises the corporation, must be carried along.
The former President of the Nigerian Bar Association added, “It cannot be the position of the law because the Minister of State (for Petroleum Resources) is the Chairman of the Board of the NNPC and the Chairman of the Board of the NNPC, together with the board, plays a corporate governance role.
“It is true that the President is the Chairman of the Board of Governors but if the President himself has appointed the Minister of State to be the chairman, then my conclusion is that the President is deemed to have delegated his powers to the Minister of State.
“So, the Minister of State is the proper, legally-appointed chairman because that power has been delegated to him by the President, just the same way that when the President was not well, his powers were delegated to the Vice-President.
“So, if the Minister of State is the Chairman of the Board, then the basic rules of corporate governance make it clear, without argument, that what the board does is to supervise the activities of the corporation. That is simple Company Law.
“So, the GMD is not correct at all; he’s not correct.”
Another SAN, Mallam Yusuf Ali, and a Lagos-based lawyer, Mr. However, disagreed with Agbakoba, saying the NNPC’s position was in order.
Ali said Buhari’s portfolio as the Minister of Petroleum Resources made it legal for him to directly supervise the Nigerian National Petroleum Corporation.
Ali believed the NNPC boss was in order to report directly to Buhari.
The SAN said, “We should not forget that the President is also the Minister of Petroleum Resources. This means that the NNPC is answerable to him and he can directly be in charge. Whether it is right for the President to double as a minister and supervise the NNPC is another line of argument.
“However, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, still has a right to get clarifications on the issues he raised. But it is not out of place for the President, who is also the minister, to supervise the NNPC.”
Also, Ogunye argued that the NNPC was legally correct to exclude the corporation’s board in contract awards.
Ogunye said under the Public Procurement Act, approval for award of contracts in public parastatals was done at two levels – the parastatal’s Tenders Board or the Federal Executive Council – depending on the volume of the contract.
He added that what had given room for controversy was that the constitution did not envisage that the President would double as the Minister of Petroleum Resources.
Ogunye said, “If the contract exceeds the threshold, the ministerial Tenders Board will process that contract award consideration and send it to the Federal Executive Council for approval.
“Now, what the NNPC is saying in the statement they pushed out is that in the NNPC Act, there is no provision of a Minister of State, which is true but it is also not expected that the President would be a minister in addition to being the President.
He stated that in view of the peculiar circumstance, the three authorities ought to work in tandem with full disclosure, saying what was playing out underlined the need for cohesion in the Buhari administration.
But another Lagos-based lawyer, Mr. Wahab Shittu, said Baru, as a matter of due process and protocol, ought not to have bypassed Kachikwu to meet with the President.
Shittu stated, “I think it is a matter of due process and respect for protocol. Baru ought to have gone through Kachikwu rather than approaching the President directly, more so when Buhari has appointed Kachikwu as the Chairman of the Board of the NNPC.
“I don’t think it is proper for Baru to bypass Kachikwu in getting to Buhari. There could be certain facts that are not known to the public and we must insist on a thorough probe; a full-blown enquiry is needed to really know what happened and until then one cannot blame either Baru or Kachikwu.”
Shehu Sani nominates David-West, Aminu for presidential probe
In his reaction, the lawmaker representing Kaduna Central Senatorial District, Senator Shehu Sani, urged Buhari to set up a presidential panel to probe the crisis between Kachikwu and Baru.
Sani, who is Chairman of the Senate Committee on Local and Foreign Debts, nominated former Minister of Petroleum and Energy and Buhari’s associate, Prof. Tam David-West; or Prof. Jubril Aminu, a former Minister of Education and Nigeria’s Ambassador to the United States to head the panel.
The lawmaker, in a Facebook post on Monday, called for the suspension of Kachikwu and Baru during the probe.
The post read, “PMB should set up a presidential committee, led by Prof. Tam David-West or Prof. Jubril Aminu, to investigate the issues in the NNPC. Also, the GMD and Minister of State should temporarily step aside.
“PMB must take this issue seriously because the figure of ‘$25bn, whether true or false or exaggerated, can stick in the memory of Nigerians for a long time and will cast a dark shadow on the legacy of the administration.”
Sani had in a similar post on Thursday urged Buhari to stop being Minister of Petroleum Resources and appoint someone Nigerians could hold accountable for the position.
Meanwhile, an energy expert and Technical Director at Template Design Limited, Mr. Bala Zakka, urged Buhari to resolve the crisis between Kachikwu and Baru.
He added, “Such friction between the two of them will definitely have a negative effect on the public and private persona of the Nigerian oil and gas sector.
“You must also understand that if NNPC were to be traded on the Nigerian Stock Exchange or international stock exchange, because of this friction, the share price of NNPC would have collapsed.”