Oil & Gas

Kachikwu, Baru rift highlights governance gaps in NNPC’s operations


October 11, 2017 | 2:15 am
  |     |     |   Start Conversation

Despite NNPC’s much touted reforms and claims to transparency, the recent rift between Ibe Kachikwu, minister of state for petroleum resources and Maikanti Baru, group managing director of the NNPC, indicates that these claims amount to a lot of hot air.

A memo Ibe Kachikwu wrote to Muhammadu Buhari, Nigeria’s president which was leaked on the internet speaks to a frosty relations between two of the country’s top oil sector managers, while indicating that reforms in the NNPC have not promoted governance and accountability in its operations

Kachikwu claimed in the letter that the NNPC GMD, Maikanti Baru has awarded contracts amounting to $26 billion without approval of the board of the state-owned corporation which he chairs, a slight he said impugns on his position as the chairman of the board.

The junior oil minister also alleged that high level appointments made in the national oil company were made without recourse to the board saying it amounted to neglect of due process. Baru and the presidency are yet to respond to the memo even as civil society groups and other stakeholders call for an investigation of the allegations.

However the structure of NNPC’s board and the reporting line of the GMD were always going to breed controversy. Last year, President Buhari separated the office of the NNPC GMD and the oil minister and delegated Kachikwu the task of chairing the board of the NNPC. But the GMD is not compelled to defer to Kachikwu because by the Act setting up the NNPC, the minister controls the national oil company, in this case the president. The oil minister could very well have approved those contracts, some analysts say.

Further, Buhari who has done nothing to change the perception of many that he is clannish, appointed his chief of staff, Abba Kyari to the board of the NNPC which Kachikwu chairs on his behalf but Kachikwu has to pass through the chief of staff to reach the president, effectively curtailing his access to the president and undermining his recommendations.

Analysts say by this arrangement, the president has made his deputy minister a figure head but the casualty of this power game is the much needed reforms in the sector to attract new investments and the elevation of unimaginative ideas include drilling for oil in the north when Boko haram terrorists are lurking around.

According to the NRGI, good governance of state owned enterprises like the NNPC, requires clear and appropriate decisions on their role and how it is financed; corporate governance systems that limit political interference and allow for effective oversight; and a commitment to transparency and accountability.

To close glaring governance gaps in state-owned enterprises, the boards of most high-performing SOEs have competent and politically autonomous members who are appointed through transparent and well-defined processes says NRGI. The NGO further stated that SOEs should select board members based on their technical expertise, rather than patronage concerns. To further constrain the influence of politics, board term limits might also be appropriate.

While the president who embodies the executive arm of government can award himself the power to administer any ministry he chooses, the petroleum resources ministry under him, from the memo Kachikwu wrote, would suggest that there is a gap in oversight function of the national oil company, which could have untoward consequences.

“SOEs become obstacles to private investment, drains on public coffers, inefficient managers of public resources, or sources of corruption and patronage that prevent countries from maximizing returns on natural resources,” said the NRGI Natural Resource Charter Benchmarking Framework.



October 11, 2017 | 2:15 am
  |     |     |   Start Conversation

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