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The claim by Dora
Akunyili, the information minister, and Olusegun Aganga, finance
minister, that Remi Babalola, minister of state for finance, was
misquoted in media reports about the raging controversy over alleged
insolvency of the Nigerian National Petroleum Corporation (NNPC) is a
curious one.

Their argument
flies in the face of rationality, considering that since last year, Mr.
Babalola consistently expressed a conviction supporting the
corporation’s insolvent state.

The 2007 oil and
gas industry audit report by Nigerian Extractive Industries
Transparency Initiative (NEITI) last year, uncovered unwholesome
discrepancies in NNPC’s accounts. About N600 billion was captured as
total unreconciled balances for either unremitted revenues for crude
exports, disbursements for subsidy petroleum products, or expenses
under the joint venture operations for the period.

NNPC’s management
agreed with the Federation Accounts Allocation Committee (FAAC) to
negotiate the figure to about N450 billion, after ignoring several
calls for reconciliation and provision of a payment plan. Last
December, FAAC issued an ultimatum demanding for the plan latest 12
January.

No repayment schedule

But at the end of
the January meeting in Abuja, Mr. Babalola told journalists that the
corporation merely gave a repayment framework without detailing a
repayment schedule, resulting in another ultimatum. However, rather
than respond, the committee was invited to a workshop on ‘Understanding
the Operations of the Oil and Gas Industry in Nigeria.’

At the conference
opening, attended by finance ministry officials, Accountant General of
the Federation (AGF), as well as their counterparts from the 36 states
and the Federal Capital Territory (FCT), Abuja, along with
representatives of revenue agencies, Mr. Babalola told reporters that
the delay in settling the debt was as a result of NNPC’s poor cash flow
situation.

“There are no
lingering contentions. The corporation has since acknowledged that it
owes. We (the FAAC) do not have a problem with the NNPC. There would be
a problem if the debtor did not agree he owes,” he said.

Asked why he
claimed there was no problem when NNPC has consistently refused to
neither pay up nor give a repayment schedule, despite several demands,
Mr. Babalola reiterated the cash flow problem of the corporation.

After the workshop,
nothing was heard about the committee’s effort to get NNPC to pay the
debt, till last May when the FAAC meeting was stalled, following
indications that available revenue in the Federation Account was
inadequate to take care of the budgeted monthly distributable revenue
for April as well as the arrears for augmentation of allocation for the
first quarter of the year.

At the end of the
June meeting, Mr. Babalola, as FAAC chairman, again restated NNPC’s
insolvency, following allegations that the committee may have been
compromised into complacency against pressurising for the debt payment,
more than six months after the December ultimatum.

Bleeding Corporation

“The issue
(payment) has lingered because the corporation is still bleeding as a
result of challenges,” Babalola said, adding, “The Group Managing
Director that took FAAC through all the corporation’s challenges and
promised to come up with a repayment plan, was changed barely after a
month. Another one came, that was also changed for a new one.

“We also know that
NNPC has some challenges, including subsidies on petroleum products
supplies that are not being replenished, making it to be bleeding, and
very difficult for it to meet certain obligations. The issue is not
about decision to pay or not.

“The truth, as we
know in the Federal Ministry of Finance as at today, is that NNPC’s
cash flow warrants that we work with them till it is able to stand on
its own as a business entity. We need to be holistic about these
issues, considering that we need to also look at NNPC’s claim that
government owes it an amount that is in multiples of what it is owing
the Federation Account,” he said.

Denying allegations
that FAAC’s concession to participate in the NNPC’s workshop was
indicative of the existence of a deal to soften its stance on the debt
payment, Mr. Babalola said last month that the exercise was “a training
session to enable members understand some technical issues in the
petroleum industry affecting NNPC’s operations, and not the
corporation’s inability to repay the N450billion.”

Describing FAAC’s
approach on the issue as a display of “unusual maturity and
understanding, considering NNPC’s peculiar operational environment,” he
wondered why he would be accused of complicity, as he was the one that
took NNPC management to the presidency over the indebtedness.

“Certainly, this
(alleged deal) is not correct. One needs to understand the operations
of the NNPC. One cannot be producing a product that costs N60 and
selling at N40, and would not be bleeding. It does not make sense,” he
said.

Curiously, NNPC’s
reasons sounded like a rehash of the arguments often canvassed by Mr.
Babalola, who has always said that the NNPC is insolvent and incapable
of discharging its obligations.

“NNPC’s current liabilities exceed its current assets by N754billion
as at 31 December, 2008. The corporation would not be able to pay the
N450billion owed the Federation Account, unless the Federal Government
reimburses the N1.154trillion it spent on subsidy expenses incurred for
petroleum products supplies and distribution since 2003,” it said.