TheCable

Last week, Ibe Kachikwu, minister of state for petroleum resources, made the headlines over a strongly-worded letter he wrote to President Muhammadu Buhari.

In the letter, the minister accused Maikanti Baru, group managing director (GMD) of the Nigerian National Petroleum Corporation (NNPC), of insubordination. Kachikwu also said Baru had reversed some of the gains he made while in charge of the oil firm — Baru succeeded Kachikwu in July 2016.

He alleged that the NNPC GMD made some appointments without consulting the board and also awarded contracts regardless of due process.

The NNPC put out its response after the letter was leaked to the media. In a statement signed by Ndu Ughamadu, the corporation said Kachikwu’s claims did not hold water.

However, the letter was silent on the allegation of illegal appointments raised by Kachikwu.

Here are the highlights of the statement.

BUHARI ORDERED BARU TO RESPOND

The statement by Ughamadu made it clear that the response to the allegation was as a result of the directive of the president.

“Following the publication of alleged lack of adherence to due process in the award of NNPC contracts, the President ordered the Group Managing Director (GMD) and Management of the Nigerian National Petroleum Corporation (NNPC) to consider and respond expeditiously to the allegations,” the statement read.

Buhari met with Kachikwu after the letter became public. Vice-President Yemi Osinbajo also had a meeting with Baru, but the presidency did not disclose the issues discussed.

‘KACHIKWU DID SAME AS NNPC GMD’

The NNPC sought to clarify transaction limits, referring to a circular dated March 11, 2009 by the secretary to the government of the federation (SGF).

The procurement methods and financial authority thresholds of application for NNPC transactions were listed as:

The NNPC maintained that these clarifications were “obtained prior to August 2015 and were implemented by Dr. Kachikwu as the GMD of NNPC who constituted the first NTB on September 8, 2015, and continued to chair it until his exit in June 2016.”

‘NO $25bn SCANDAL’

Kachikwu had said Baru awarded contracts amounting to $25 billion without consulting him or the board of the NNPC.

He gave a breakdown of the contracts as:

• The Crude Term Contracts – valued at over $10 billion
• The DSDP contracts – value over $5 billion
• The AKK pipeline contract – value approximately $3 billion
• Various financing allocation funding contracts with the NOCs – value over $3 billion
• Various NPDC production service contracts – value at over $3 billion – $4 billion

Critics used this as an avenue to discredit the Buhari government. The Peoples Democratic Party (PDP) demanded the immediate suspension of Baru, saying the allegation exposed the hypocrisy in the “so-called anti-corruption fight”.

“The NNPC $25 billion scandal is less than 10% percent of the ($2 billion) involved in the so-called arms fund allegedly converted by the former NSA for which hundreds of Nigerians have been arrested and hounded,” PDP said in a statement.

But in its reaction, NNPC said all the contracts listed in Kachikwu’s letter were validly conducted within the expenditure limits of the agency. The corporation also countered the argument that due process was not followed.

“These transactions were not required to be presented as contracts to the board of the NNPC,” it said.

“The law and the rules do not require a review or discussion with the minister of state or the NNPC board on contractual matters. The board has no role in contracts approval process as advised by BPP.”

‘NOT EVERYTHING IS A CONTRACT’

The NNPC accused Kachikwu of attributing arbitrary values to shortlists for agreements that should not be classified as contract awards.

Ughamadu said: “It should be noted that for both the Crude Term Contract and the Direct Sale and Direct Purchase (DSDP) agreements, there are no specific values attached to each transaction to warrant the values of $10billion and $5billion 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 shortlisting of prospective off-takers of crude oil and suppliers of petroleum products under agreed terms.

“These transactions were not required to be presented as contracts to the Board of NNPC and, of course, the monetary value of any crude oil eventually lifted by any of the companies goes straight into the federation account and not to the company.”

‘NNPC TENDERS BOARD NOT SAME AS NNPC BOARD’

NNPC explained that the structure and roles of the NNPC tenders board (NTB) and the NNPC board appointed by government were quite distinct.

While the NNPC board is a governing board that has oversight over the approval of work programmes, corporate plans and budgets, the NTB is responsible for approval of day-to-day procurement implementation.

According to the NNPC statement, the NTB comprises 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 NTB.”

NNPC CONTRACTING PROCESS ‘IS VALID’

A seven-step procedure for awarding contracts within the NNPC was outlined in the statement.

From the initial approval of project proposal and contracting strategy by NTB, to the presentation of same contract to the federal executive council (FEC) for approval, it was reiterated that all contracts that passed through the national oil company followed due procedure.

Mentioning the direct sale direct purchase (DSDP) contract valued at over five billion dollars as an instance, it was said that the seven-step procedure was duly followed in shortlisting the DSDP partners for the 2017/2018 cycle under review.

According to the NNPC, a “detailed evaluation was carried out and the short list of the successful off-takers was presented to the approving authority (Mr. President) for consideration and approval”.