The approval by President Muhammadu Buhari for transfer of about $1.1billion oil revenues by the Nigerian Petroleum Development Company (NPDC) to some government agencies has stoked a controversy with some experts saying the transfer without appropriation by the National Assembly is an impeachable offence.
The Legal Director of Abuja-based Aspen Energy Limited, Israel Aye, and Lead Director, Centre for Social Justice (CENSOJ), Eze Onyekpere, spoke on Sunday in reaction to a leaked confidential document that circulated on social media last week about the controversial approval.
The documents bore the signature of the late Chief of Staff to the President, Abba Kyari. They conveyed details of a payment plan purportedly approved by President Buhari for NPDC to transfer about $1.099 billion to various government-owned agencies from concession rents in respect of oil mining lease (OML 11) that should have been paid to the Department of Petroleum Resources (DPR).
Details of the memo
The memo No. SH/COS/24/A/8928 dated July 29, 2019, addressed to the Permanent Secretaries, Federal Ministries of Petroleum Resources and Finance as well as the Director-General, Budget Office of the Federation was titled: Re-Consideration Payable by NPDC for Award of OML 11.
It made reference to a letter No. MPR//PS/032/S.14/II/179 of July 15, 2019, which allegedly conveyed President Buhari’s approval for the payment of $1,099,655,792.20 by the NPDC as “Goods and Valuable Consideration for the award of OML 11.”
In the memo, the president also approved a payment plan over six instalments to different government agencies between October 31, 2019, and April 30. DPR was directed to forward to the presidency periodically evidence of the transfer of the funds by the NPDC in the agreed instalments.
Details of the approved payment plan showed the Budget Office of the Federation was directed to allocate, as the NPDC would make the transfer, about $200 million to the electricity distribution intervention project under the FGN/Siemens project by October 31, 2019.
The amount to be captured in the 2020 Budget was to be credited to a special purpose vehicle (SPV) to be set up by the Federal Ministry of Finance for the electricity distribution intervention project and managed by the Ministry of Finance Incorporated.
Similarly, $200 million each was to be paid by the NPDC by April 30, 2020, October 31, 2020, April 30, 2021, October 31, 2021, while $99,655,792.20 was to be paid by April 30, 2022.
Specifically, about $270million was to be allocated to the NSIA in April and October 2020 for the Presidential Infrastructure Fund.
The balance of $629.7million was also approved by the president to be used by the Budget Office to fund the regular 2020 budget in the period the funds would be received from the NPDC.
Background to OML 11
The OML 11 previously belonged to SPDC. But, following the series of crises in Ogoniland in Rivers State, which impacted SPDC operations in the area, oil production from the oil block was stalled for over 30 years, as the company was denied entry to the area by the host communities.
To restore oil production from the area, the federal government decided to transfer the oil block and the assets to the NPDC, which is the upstream subsidiary of the NNPC. Despite being a government-owned company, DPR demanded the payment of $1.099 billion as the signature bonus.
Despite several reminders by the DPR, the minister said the NPDC failed to make the payment. He said the president intervened and approved that the payment be made in six installments to different agencies to fund different government commitments to ongoing projects.
Apart from increasing the federal government’s savings to the Nigerian Sovereign Investment Authority (NSIA) Fund, an official said the government wanted to use part of the money to support efforts to boost electricity distribution capacity in the country.
Chapter 162 Section (1) of the 1999 Constitution states that “The Federation shall maintain a special account to be called “The Federation Account” into which shall be paid all revenues collected by the government of the Federation, except the proceeds from the Personal Income Tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the Ministry or Department of Government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.”
The constitution identifies several revenue streams to government from the oil and gas sector, including those paid to the Federal Government through its agencies, and others paid directly to sub-national entities. Those paid directly to the Federal Government include proceeds from crude oil and gas sales, Petroleum Profits Tax (PPT), Oil & Gas Royalty, Signature Bonuses, Licenses and Concession Rental, Gas Flared Penalties, Companies Income Tax (CIT) and Education Tax (EDT).
Other revenue flows to sub-national entities include the Niger Delta Development Commission (NDDC) Levy; Nigerian Content Development and Monitoring Board (NCDMB) payments, and Nigerian Export Supervision Scheme (NESS) fees.
Serious constitutional violation
But Mr Onyekere faulted the president’s directives, describing it as a “serious criminal violation of the Constitution”, which amounts to an impeachable offence.
“Any approval of funds belonging to the Federation Account should pass through the Council of States for an agreement on what to do with them, while funds belonging to the Federal Government should pass through the National Assembly for appropriation before allocation and disbursement.
“It’s a very serious criminal offence to disburse federal government revenues without passing through appropriation by the National Assembly. Any allocation of revenues without the involvement of the National Assembly is a very serious criminal impeachable offence, as it amounts to the illegal usurpation of the role of the National Assembly in the constitution,” Mr Onyekpere said.
For Mr Aye, “Those “directed” disbursements purportedly issued by the President violate the country’s constitutional structure that provides that all revenues due to the Federal Government on behalf of the Federation should be paid into the Federation Account and appropriated only via an ‘Appropriation Act’ passed by the National Assembly.”
But the Minister of State for Petroleum Resources, Timpreye Sylva, defended the president’s action, saying it was a “harmless” decision to assist the NPDC in paying for the oil concession inherited from the Shell Petroleum Development Company (SPDC).
Mr Sylva described the leaked document as an attempt by mischief makers to twist the government’s good intentions.
“People always circulate half-truths for mischievous reasons to give the government a bad name. It’s a show of mischief or ignorance, or both, for anybody to think that kind of money could be shared the way the people behind the documents would want Nigerians to believe. That is not possible,” Mr Sylva said.
The minister said the $1.099billion was the signature bonus the NPDC was supposed to have paid to the DPR for OML 11 transferred to it by SPDC.
“The issue is very clear. NPDC is the upstream subsidiary of the Nigerian National Petroleum Corporation (NNPC). The money was supposed to have been paid to the DPR as signature bonus for the oil block. But, NPDC had no such money to pay at once. DPR sent several demand notices to the NPDC for the payment.
“So, the payment plan approved by the President, which is being mischievously circulated on social media, was a way to get the NPDC to make the payment in six different tranches, which was specified in the letter. By this year, the NPDC should have paid the second installment,” the minister said.
The minister said the approved allocation of the funds to the different agencies was not illegal, as utilisation of signature bonus paid to the federal government for oil blocks by licensees does not require any appropriation.
He said because of the peculiar circumstance through which the NPDC got the oil block, the government considered the most convenient arrangement to enable the company to make the payment.
Despite the arrangement, the minister said the NPDC has defaulted in the payment plan.
“As I speak, even with the arrangement, after the first payment, the NPDC defaulted in the payment plan. So, the $1.099billion has not been paid yet by the NPDC. So, that should disabuse the mischief-makers’ mindset of any money missing. In any case, mere approval did not mean actual payment. We (the Ministry) have written to the NPDC to remind them,” the minister explained.