NNPCL And Challenges of Fidelity

NNPCL And Challenges of Fidelity

By Emmanuel Onwubiko

The petroleum Industry Act is one of the most illustrious pieces of legislations to have emerged from the National Assembly since democracy berthed in 1999 and signed ultimately into a law if the federation by the nation’s President. It took over two decades in the works, but eventually it made it into a law in the year 2021 even though public conversations about it started as soon as the extant constitution came into being and the clamour for resource control became defiantly unending.

In November, 2021, an expert by name Kasirm Nwuke did a powerful write- up summing up the essence of the aforementioned law of the Federation governing the crude oil sector of the economy.

In the piece published by www.brookings.edu, this gentleman also established the nexus between the emergence of this Powerful Petroleum Industry Act and the emergence of a new commercial entity from the hitherto publicly owned institution known then as the Nigerian National Petroleum Corporation which metamorphosed into what was expected to be commercially viable and stable: the Nigerian National Petroleum Company Limited. The company was registered with pioneers clearly enshrined in the registration certificate issued by the Corporate Affairs Commission.

In November as i earlier stated, the expert Mr. Nwuke wrote that in the year 2021, then Nigerian President Muhammadu Buhari signed the Petroleum Industry Act (PIA) 2021, bringing to a close a 20-year effort to reform Nigeria’s oil and gas sector, with the aim of creating an environment more conducive for growth of the sector and addressing legitimate grievances of communities most impacted by extractive industries.

A lot, he said, has changed in the sector domestically and globally since the reform efforts began. The number of indigenous oil and gas firms has grown, but so has the number of oil-producing countries in the region. Militancy in oil-rich communities, while remaining, has diminished. Concerns over climate change have fueled aggressive efforts to reduce global consumption of fossil fuels—driving divestment from oil and gas by companies, institutions, and countries.

The PIA, he affirmed in that piece, represents an effort by Africa’s leading oil-producing country to respond to this changing environment. In 2019, the oil and gas sector accounted for about 5.8 percent of Nigeria’s real GDP and was responsible for 95 percent of Nigeria’s foreign exchange earnings and 80 percent of its budget revenues. In addition, because the law is far-reaching in its remit, it is complex and not easy to summarize.

He then made a clincher: “If properly and vigorously implemented, the PIA can represent the gold standard of natural resource management, with clear and separate roles for the subsectors of the industry; the existence of a commercially-oriented and profit-driven national petroleum company; the codification of transparency, good governance, and accountability in the administration of the petroleum resources of Nigeria; the economic and social development of host communities; environmental remediation; and a business environment conducive for oil and gas operations to thrive in the country. However, these results are conditional on Nigeria’s political and oil industry leaders overcoming some key challenges that are discussed following the summary of the key provisions of the act.”

It is important, however, to mention that the old NNPC was overwhelmed by a cacophony of challenges of lack of transparency and accountability which were essential elements that the new law known as Petroleum Industry Act was actually created to cure and bring about transparency, accountability and fidelity to the provisions of the law and compliance to best global practices.

But in the Nigerian Political firmament, old corrupt ways are so difficult to overcome and this demon of corruption and poor governance has reared its ugly head and has indeed characterised the new NNPCL. At the head of serial violations of the provisions of the extant PIA, is the president of the Federal Republic of Nigeria who has continued to behave as if the law doesn’t really matter.

In a clear violation of the relevant section of the PIA, the then president Muhammadu Buhari arbitrarily removed the pioneer chairman of the NNPPCL Senator Ifeanyi Ararume and then illegally decided to make another appointment in clear breach of the tenure of office of the chairman.

Mr Buhari, it would be recalled, appointed Mr Ararume as the non-executive chairman of the NNPC Limited for a five-year term in September 2021.

The appointment, by virtue of the letter dated 20 October 2021, issued to him by the Secretary to the Government of the Federation, Boss Mustapha, took effect from 21 September 2021, the date NNPC Limited was incorporated as a private company limited by the Corporate Affairs Commission (CAC).

The incorporation of the national oil company was necessitated by the coming into force of the Petroleum Industry Act, 2021, which led to the unbundling of the agency which had operated for decades as a public corporation.

The new board was initially scheduled to be inaugurated by President Buhari on 24 November 2021, but was suspended indefinitely without any reason offered on the eve of the scheduled event.

The presidency, on 5 January, made a fresh announcement of the appointment to the NNPC Limited’s board which revealed that Mr Ararume’s name had been replaced. Other appointees’ names remained on the list as earlier announced in September 2021. No reason was given for the replacement of Mr Ararume’s name.

Mr Ararume said in his suit that the inauguration of the board on 7 January with another person named as the non-executive chairman of the company came to him as a surprise.

He said he only received a letter dated 17 January informing him of the withdrawal of his appointment 10 days after the inauguration of the board.

“That no reasons whatsoever were adduced by the 1st defendant in the said letter 17th day of January 2022, warranting my purported removal or withdrawal of my appointment as the non-executive chairman of the 2nd defendant,” he wrote in his affidavit filed in support of his suit.

‘Why my sacking is wrong’

He said he had assumed duty as the non-executive chairman of the company on 12 November 2021, and, in that capacity, subsequently attended the 23rd World Petroleum Congress at Houston, Texas in the United States.

Having been appointed, Mr Ararume said, inauguration was “merely a ceremonial event” with no legal effect on his status and that of the other directors.

He said Mr Buhari lacked the power to remove him at will as his office was governed by the Companies and Allied Matters, 2020, the Petroleum Industry Act, 2021, and the company’s Memorandum and Articles of Association.

The Federal High Court, Abuja, on Tuesday, restored Senator Ifeanyi Ararume as the non-executive Chairman of the Nigerian National Petroleum Company Limited.

The court set aside his removal by the President, Major General Muhammadu Buhari (retd.), which happened on January 17, 2023.

Ararume had dragged Buhari before the court praying it to declare his removal as the NNPCL chief illegal, unlawful and unconstitutional and that it was a total breach of CAMA law under which the NNPCL was incorporated.

Furthermore, he prayed the court to issue an order to return him to office and also demanded N100 billion as compensation for the damages he suffered nationally and internationally.

Delivering judgement, Justice Inyang Ekwo voided Ararume’s sacking and awarded N5bn as damages against Buhari and the NNPCL, to be paid for the disruption of Ararume’s appointment on the grounds that the action of the President was arbitrary, unlawful and illegal.

The justice ordered that Ararume be immediately restored to office as the non-executive chairman of the NNPCL.

The judge also declared as null and void all decisions of the Board of Directors of the NNPCL carried out in the absence of Ararume.

Justice Ekwo held that Buhari acted ultra vires, wrongful, illegal, null and void in the ways and manners Ararume was sacked after using his name to register the NNPCL and that such an act could not stand in the face of the law.

The Nigerian National Petroleum Company Limited (NNPCL) has however belatedly filed an appeal at the appellate court against the verdict of the court of first instance voiding the removal of Ifeanyi Ararume as non-executive chair of the petroleum company.

Former President Buhari had appointed Ararume as board chairman of the national oil firm in September 2021, but he was later sacked and replaced with Margaret Chuba Okadigbo in January 2022. This is considered as the most egregious breach of the PIA and it is expected that the court of law will uphold the sanctity of the PIA as was done in the comprehensive and far reaching verdict of the Federal High Court Abuja division which is being challenged by the government.  The same government that filed an appeal proceeded again, to appoint new governing board in clear demonstration of a lack of regard to section 6 of the constitution which confers the judicial powers of the Federation to the courts of competent authority. The second infraction was also made when it was reported in the media that the president has asked the central bank of Nigeria to coordinate the exports of crude oil resources which the PIA gives to the NNPCL.

Without prejudice to the possibility of any good that was intended in the decision of the Federal Government to make the Central Bank of Nigeria (CBN) take over the responsibility for crude oil sales proceeds from the Nigerian National Petroleum Company Limited (NNPCL), it must be clearly stated that the action is not legal in its application, so says Alhaji Atiku Abubakar the former Vice president of Nigeria.

Although, as usual, of the current administration, little has been communicated to the public about explaining details of the decision, Atiku had argued.

Atiky stated further: “According to what is publicly available, the President has issued a directive that henceforth, the NNPCL would submit receipts for crude oil sales to CBN for vetting and documentation.

Whatever may be the merit of the new arrangement, the presidential directive is a violation of the legal status of the NNPCL.

It is an arbitrary order capable of undermining the operational independence of the NNPCL.

By this order, Mr. President has wrested control of the finances of the NNPCL and donated the same to the Federal Ministry of Finance and the Central Bank of Nigeria.

This is an unprecedented act, without any legal or ethical basis. It is also a violation of the principle of due process in public administration.

State-owned enterprises are not subject to such arbitrary orders and have full control over their finances within the confines of their respective establishment laws.

The NNPCL is a creation of the Petroleum Industry Act 2021 (PIA), which was signed into law by the President of the Federal Republic of Nigeria on 16 August 2021.

The PIA makes extensive provisions for the formation, structure, governance, and operation of the NNPCL as an independent limited liability company in Sections 53 to 65 of the Act.

The government must, therefore, respect the provisions of the law and allow the NNPCL to run as an independent company based on sound commercial objectives and in line with international best practices and standard principles of corporate governance.

Only then would the new NNPCL grow into a formidable institution with track records, requisite technical and financial capacity, and readiness to operate in public space.

Any attempt to undermine the operational independence of the NNPCL will be a hindrance to any chances of attracting investments and attaining global relevance in the Petroleum Industry Act,” Atiku concluded. In conclusion, this writer is of the opinion that respecting the provisions of the PIA will enable the generality of Nigerians to enjoy the benefits of the crude oil resources which under the old order wasn’t the case. Nigeria has over 133 million absolutely and multidimensionally poor people even when it is raked very highly in the World as one of the largest exporters of crude oil resources.

Recently, Nigeria retained its position as the largest oil producer in Africa, according to the Organisation of the Petroleum Exporting Countries (OPEC).

In its latest monthly report recently, the oil cartel said Nigeria’s oil output increased in October 2023 to 1.351 million barrels per day (bpd) – from 1.347 million bpd in the previous month.

According to the report, in September 2023, Nigeria’s oil output was also the largest in Africa — amounting to 1.347 million bpd, and surpassing Libya and Angola.

OPEC said its data was based on direct communication.

The oil cartel said in October, Nigeria sustained the momentum, even as Algeria produced 961,000 bpd, Angola recorded 1.147 million bpd, and Libya reported 1.188 million bpd.

“Total OPEC-13 crude oil production averaged 27.90 mb/d in October 2023, higher by 80 tb/d, m-o-m,” the oil cartel said.

“Crude oil output increased mainly in Angola, IR Iran and Nigeria, while production in Libya, Saudi Arabia and Kuwait decreased”.

This is exactly why we are advocating fidelity to the petroleum Industry Act by the Federal Government of Nigeria. President Bola Ahmed Tinubu should as a matter of necessity, adhere strictly to the provisions of this law.


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