Past is truly prologue as NNPC’s shady dealings 11 years ago raise questions today on the opportunity cost forgone on a $5 billion dividend payment still missing.
- The Nigerian National Petroleum Company accrued debts amounting to $8.5 billion in subsidies in the early 2000s;
- By the end of 2009, NNPC saw fit to divert dividend payments to the tune of $5 billion from shareholding firm, NLNG to settle a part of said debts;
- Till date, there are no whispers of remuneration to the federation account, neither is there a plan in place;
- Experts cry foul, accusing the state-owned oil firm of contravening legality; further questioning the expenditure of other dividend payouts in the ensuing years.
Once again, NNPC’s financial statements show why subsidy has been a double-edged sword in Nigeria’s history. In a move that raises questions on legality and accountability, the state-owned oil firm diverted $5 billion towards subsidy debt servicing. NNPC did this by siphoning dividend meant to remit to the government from a shareholding firm, National Liquefied Natural Gas (NLNG).
NPDC financial statement 2019
But perhaps the most interesting point is that NNPC did this 11 years ago. According to their financial statements, the state-owned oil firm borrowed the sum from the NLNG account to settle debts accrued due to revenue shortfalls from petroleum price irregularities. The sum, which by the way, represents about 27% of the total dividend payment – $18.3 billion (about ₦6 trillion) – to the government between 2004 to 2019. What the statements, however, failed to mention is whether NNPC paid back the sum. To say nothing about the legal implications, raising questions on who sanctioned it.
Who Approved Payment of Subsidy Shortfall from NLNG Dividend
In a memo seen by Premium Times in 2018, the NNPC claimed that President Muhammadu Buhari was aware of withdrawals from the NLNG dividend account to cater for subsidies. Howbeit, the National Assembly described the action as against the nation’s appropriation law. The Vice President Of Nigeria, Mr Yemi Osinbajo, in another twist, said NNPC bears the cost of subsidy and not the FG.
The secrecy on the payment of subsidy continues to threaten the socio-economic development of the country. It also serves as an affront to President Buhari’s transparency and accountability mantra.
Experts cry foul
“It is illegal, and, by law, NNPC should only pay NLNG revenue directly into the FAAC account.”
In response, Henry Adigun, team lead at FOSTER, described the borrowing from NLNG dividends to fund subsidy as illegal, with a caveat of all stakeholders signing off on it.
“Unless all stakeholders sign off on it, it remains illegal. So the question is, did the stakeholders know and approve? Though the borrowing was said to be approved by the Board, the Board does not have the power to give such approval without a clear instruction from the Federal Accounts Allocation Committee (FAAC).”
Moreover, FG must make such transactions public knowledge. In its 2018 oil and gas audit, the Nigeria Extractive Industries Transparency Initiative (NEITI) maintained that FG made public its treatment on all categories of payments from NLNG.
By and large, this revelation also questions the whereabouts of the other dividend payouts in the ensuing years. Has the state-owned oil firm been surreptitiously diverting sums to fit its other purposes?
NLNG revenue in the last 16 years
| Years | Dividend – NNPC ($) |
| 2004 | 278,860,715.00 |
| 2005 | 57,425,460.17 |
| 2006 | 332,979,540.83 |
| 2007 | 842,956,858.80 |
| 2008 | 2,613,170,000.00 |
| 2009 | 848,680,000.00 |
| 2010 | 1,401,400,000.00 |
| 2011 | 2,509,780,000.00 |
| 2012 | 2,768,990,000.00 |
| 2013 | 1,260,704,340.00 |
| 2014 | 1,389,908,436.93 |
| 2015 | 1,043,764,965.12 |
| 2016 | 356,126,898.44 |
| 2017 | 798,140,840.45 |
| 2018 | 904,498,502.96 |
| 2019 | 915,645,702.33 |
| Total | 18,323,032,261.03 |
Who will refund $5 billion NLNG, an enormous cost on Nigerians?
There is also the literal million dollar question on refunding. But so far, the statements revealed nothing on repayment, or a plan of remuneration to the government’s accounts. Likewise, the Nigerian Petroleum Development Company’s statement was also silent on any repayment plan by the parent body. And while the National Assembly has tried to unravel this mystery for years, NNPC stayed mute.
On the flip side, NLNG had, occasionally, explained that it has nothing to do with the dividend payment. Divesting itself of blame, the company maintained that it fulfilled its obligations by paying dividends to its shareholders, including the Nigerian Government through NNPC.
How $5 billion (₦1.9 trillion) would have helped Nigeria
Besides the contravened legality, there is the opportunity cost forgone. Already, the 2021 budget proposals have a deficit of ₦5 trillion ($13 billion). Now imagine what $5 billion could do in catering for capital projects? Dataphyte answered that question, citing seven key ministries of the government.
Health
At an average cost of ₦28 million per one Primary Health Centre, it could have allowed the country to create more than 60,000 additional functional health centres and equip them with modern facilities.
Education
At a cost of ₦17 million each, the cost could have built 112,000 units of 3-block classrooms across the country.
Housing
The borrowed dividend could have helped the country build over 100,000 mortgage homes at ₦15 million each across the country and reduce the country’s housing deficit. Nigeria’s housing deficit continues to rise daily due to urban population growth.
Water and sanitation
It could have constructed millions of boreholes at ₦600,000 each across the country to ensure proper hygiene and fight coronavirus.
SMEs
With ₦5 million loans for each entrepreneur in Nigeria, it could have helped 300,000 small business owners to scale their businesses, cushion pandemic effects, employ millions, and grow the economy.
Agriculture
With ₦5 million loan, the cost could have put smiles on 300,000 farmers’ faces across the agricultural value chain. It could have helped solve perennial challenges such as logistics and seedling.
Economy
It could have helped Nigeria reduce its debt burden. Presently, the country is facing huge debt at ₦31.01 trillion ($85.9 billion) as of June 2020, according to the Debt Management Office (DMO).
Electricity
It could have provided 5,200 megawatts of solar electricity to the national grid at ₦360 million per megawatt.
Roads
With the funds, the governement could have constructed about 3,800 km of road networks across the country at ₦500 million per km. These would have helped the country to reduce Sukuk bond borrowings or focus bond issuance on any critical project.
On Rapid Response Jobs
The cost could cover training and employment for Nigeria’s 21.7 million unemployed citizens at ₦30,000/month stipend for a few months.
This report is part of the fulfilment of the ATUPA fellowship by Civic Hive in collaboration with the US Embassy.