Monday , 23 October 2017

Kachikwu/Baru face-off: Conflict to end soon as Buhari insists that sanity should prevail

When the bell that ushered in the third quarter (July – September) of 2017 started to toll, there were not very obvious indications that the relationship between Dr. Emmanuel Ibe Kachikwu, Minister of State for Petroleum Resources, and Mr. Maikanti Baru, Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, was heading for the rocks, despite speculations at the NNPC towers where both oil chiefs hold forte, for some reasons.

First, in the public, both ‘jolly-good-fellows’ could still smile and shake hands. Second, Baru was also seen, representing Kachikwu in some official engagements, which suggested cooperation and commitment to the development of the nation’s oil and gas industry in particular, and the economy in general. President Buhari

But that was not to be. In a leaked memo to President Muhammadu Buhari, Kachikwu expressed dissatisfaction with questionable practices in the state-owned NNPC. Specifically, the Minister of State disclosed that five major contracts were awarded without the approval of the NNPC board which has Kachikwu as chairman.

In the letter obtained by Sunday Vanguard (and which has been circulated all over the social media sphere) the minister disclosed that things had moved from bad to worst in the Corporation. Specifically, Kachikwu lamented that: ‘’I resumed work confronted by many publications of massive changes within NNPC. Like the previous reorganizations and reposting done since Dr. Baru resumed as GMD, I was never given the opportunity before the announcements to discuss these appointments. This is so despite being Minister of State of Petroleum and Chairman NNPC Board.

‘’The Board of NNPC which you appointed and which has met every month since its inauguration and, which by the statues of NNPC is meant to review these planned appointments and postings, was never briefed. Members of the Board learned of these appointments from the pages of social media and the press release of NNPC.

‘’At the minimum and like all other Parastatals being supervised by me at the Ministry have continued to do, and in compliance with the proper governance standards expected of a serious public institution, these executive actions by NNPC were supposed to benefit from mine and the Board’s input prior to presentation to you. I need to add that backdoor and present same to the acting president were met with a request that this be discussed with me. This was never done.

‘’Indeed, in anticipation of vacancies that would arise from retiring senior executives of NNPC, I wrote the GMD A letter requesting that we both have prior review of the proposed appointments. This was to enable me to present same to the Board or give an anticipatory approval and then review with the Board later (Appendix 1). I wrote to the GMD given previous happenstance of this nature, in addition, thereafter, I called the GMD to a private meeting where I discussed these issues. Needless to say that, not only did he not give my letter the courtesy of a reply, he proceeded to announce the appointments without consultation or Board concurrence.

‘’Mr. President please note that there is a Board Services Committee whose function is to review potential appointments and terminations of Senior Staff prior to implementation. This committee was also not consulted. The above is just one of the many occurrences of disrespectful experiences I have encountered with the GMD as your Minister of State.’’

Referring specifically to award of contracts, Kachikwu noted that: ‘’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 over one year of Dr. Baru’s tenure, no contract has been run through the Board. This is despite my diplomatic encouragement to Dr. Baru to do so to avoid wrongfully painting you as a President who does not allow Due Process to thrive NNPC.

‘’Given the history of malpractices and the public perception of NNPC as having a history of non-transparency (Appendix 2: NEITI report), the NNPC Tenders Board (NTB) cannot be the final clearance authority for contracts it enters into. The NTB which is a collection of top level NNPC executives and COOs, with the GMD as Chairman, cannot continue to be the final approval authority for multi-million dollar contracts and transactions involving NNPC to the exclusion of the Board. Board members have singularly and collectively raised these issues to no avail.

‘’The following major contracts were never reviewed by or discussed with me Board of NNPC: The Crude Term contracts- value at over $10bn, the DSDP contracts- value over $5bn, the AKK pipeline contract- value approximately $3bn, various financing allocation funding contracts with the NOCs – value over $3bn, various NPDC production service contracts – value at over $3bn–$4bn.

‘’There are many more Your Excellency, in most of these activities; the explanation of the GMD is that you are the Minister of Petroleum and your approvals were obtained. However, the correct governance should be that the Minister of the State and the Board review the transaction and give their concurrence prior to presentation to you. As I many cases of things that happen in NNPC these days. I learn of transactions only through publications in the media. The question is why is that the Parastatals which I supervise as Minister of State or Chair of their Board are able to go through these contractual and mandatory governances processed and yet NNPC is exempted from these?

‘’I know that bravado management style runs contrary to the cleansing operations you engaged me to carry out at the inception of your administration. This is also not in consonance with your renowned standards of integrity”.

On their relationship, Kachikwu continued: ‘’Your Excellency, even though the appointments of the other Parastatals Heads in my Ministry were made without my input. I have maintained a cordial and respectful relationship with all. Parastatals under my supervision have continued to excel in their respective areas and adhere to mandatory governance processes. However, my working relationship with GMDs has been fraught with humiliation, side-lining and campaigns of character defamation against me. This is particularly frustrating given many contributions I have made to the growth and stability of the Nigerian Oil and Gas industry through the many policies I have introduced August 2015.

‘’If NNPC is considered and known to be one of the Parastatals under the Ministry, why does the GMD refuse to report into my office or to the Board on the serious issues such as above especially given that I have been by Your Grace, the Minister overseeing these Parastatals for two years? Your Excellency, even at the time when we were unfortunate to have you away to England for a medical check-up, the situation remained the same.

Also, Kachikwu indicated that: ‘’the matter of collaborative meeting is another issue altogether. When I call for meetings, the GMD chooses which meetings he wishes to attend and those he chooses to send subordinate. He sends such subordinates without the courtesy of a call to explain his absence. The unattended meetings are in the majority. In all of 2017, I have been able only to get him to have one on one meeting with me about four to five times.

‘’At inception, I instituted a Monthly Parastatals review meeting with Head of Agencies and another with the all the senior management in all the Parastatals. GMD objected to his Senior Staff coming to the Joint Senior Management meetings. He argued that this was overreaching his territory. He was only comfortable with the Monthly Heads of Agencies meetings which he has only attended a few times. I have had to carry on with the rest of the Ministry. Despite being Chairman of NNPC Board, I have tried to manage the bad perception created by GMDs blatant insubordination and disrespectful attitude. Particularly I have worked hard to avoid being seen as pretty and meddlesome.’’

Consequences

The development which was well-reported in local and foreign media has projected the NNPC, Ministry of Petroleum Resources and Nigeria in very bad light. Although many persons declined to comment on the issue, Sunday Vanguard gathered that it has affected the image of the NNPC and ministry, and by extension Nigeria.

President Buhari’s intervention

But the situation may soon be put behind following the intervention of President Buhari last Friday. The President, it was gathered, called on both of them to drop their differences and work towards tackling issues such as attack on oil and gas facilities, funding of new projects and rehabilitation of refineries as well as implementation of Nigeria’s new petroleum policy in order to guarantee long term survival of the nation’s oil and gas industry.

Cooperation for policy implementation

The policy which copy was obtained by Sunday Vanguard at the weekend, articulates a vision for the petroleum industry and sets policy goals, strategies and an implementation plan for the introduction of an appropriate institutional, legal, regulatory and commercial framework to resolve the barriers currently affecting investment in the sector.

It stated: ‘’It is intended that this policy will be reviewed and updated periodically to ensure consistency in Government policy objectives at all times. Once issued and gazetted, any policy position set out herein will bind Government officials unless and until amended or replaced by a formal restatement of policy duly gazetted by the Government. NNPC

‘’The previous petroleum policy encourages rent seeking through a crude oil export for cash business. It is the only OPEC country without effective oil refining capacity. Investments in mid-­stream infrastructure (storage, terminals, transportation and processing) have lagged behind upstream investments. Even the upstream crude oil export business has suffered because of insecurity. Nigerian production has not risen in line with its potential or its peers in the Middle East or Africa.

‘’The petroleum sector has been dominated by state ownership and dominant market power in the upstream and mid-­stream. Consequently, the private sector has been constrained. There are fiscal disincentives to new participants; a lack of regulatory rigour and absence of governance in cost efficiency. As a result, state control and rent seeking by government has limited the growth of self-­sustaining industries. Despite having large energy resources, Nigeria has become energy insecure exhibiting multiple dependencies on: 1) crude oil exports;; 2) product imports; and 3) Hydrocarbon based electric power industry.

‘’The oil world has now changed fundamentally and the old policy is no longer relevant to Nigeria’s future. The oil price has crashed and is forecast by the Petroleum Policy Team to remain at a median $45/bbl real for the foreseeable future. Production around the world remains high, combined with large inventories in storage and even in tankers around the world. The reality is that the world is awash in oil.

‘’There are forecasts that the world is now starting to enter a post-­oil period. Oil demand growth is expected to be slower in the future than it has been in the past, and within the next twenty years, demand for oil may show absolute declines. The future for oil producers lies in value added refining and petrochemicals. The intention of this Petroleum Policy is to move Nigeria away from crude oil exports into value added activities in oil, namely refining and petrochemical industries and expanding from oil into gas based industrialisation, based on the as yet largely untapped large gas reserves in Nigeria.’’

  • By Udeme Akpan, Vanguard

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