Adoke and NNPC, CBN rift

The Senate Committee on Finance had sought his legal opinion on some of the issues raised during the investigative hearing on the alleged missing N6 billion ($20million) oil funds so as to interpret certain laws which drew a battle line between two government institutions – Central Bank of Nigeria (CBN) and Nigerian National Petroleum Corporation […]

The Senate Committee on Finance had sought his legal opinion on some of the issues raised during the investigative hearing on the alleged missing N6 billion ($20million) oil funds so as to interpret certain laws which drew a battle line between two government institutions – Central Bank of Nigeria (CBN) and Nigerian National Petroleum Corporation (NNPC).
Specifically, Adoke’s appearance was to give legal opinion on the status of the Nigerian Petroleum Development Corporation (NPDC), a subsidiary of the NNPC and whether all NNPC revenues are payable into the Federation Account, as well as the legality of the strategic partnership it entered into with some private companies.
While giving his legal opinion, Adoke raised three issues: One, on whether NNPC can transfer or assign oil block to NPDC. He answered this in the affirmative. He said that the NNPC, can legitimately transfer its participating interest in oil mining leases (OMLs) to its wholly owned subsidiary, the NPDC.
He explained that sequel to paragraph 14 to 16 of the First Schedule of the Petroleum Act, CAP.P.10 Laws of the Federation of Nigeria, LFN, 2004 (NNPC Act) and Regulation 4 of the Petroleum (Drilling and Productions) Regulations 1969 as amended, a holder of an OML or Oil Prospecting License (OPL) can assign its interest provided the consent of the Minister of Petroleum Resources is obtained.
He told the committee that: “Furthermore, Section 6(1)(C) of the NNPC Act empowers the corporation to establish and maintain subsidiaries for the discharge of its functions. The NPDC was thus incorporated as a limited liability upstream company of NNPC to carry out its upstream operations as envisaged by the law.’’
He however added that he could not appropriately respond to the issue because he did not have all the necessary documents.
Issue 2, on whether all revenues derived by the NNPC from upstream operations including those under which OMLs in the JV operations are payable to the Federation Account, Adoke said that NNPC is generally under an obligation to remit its revenue from the upstream petroleum operations into the federation account.
He explained that this is however dependent on the definition of ‘revenue’ within the meaning and intendment of Section 162 (10) (c) of the Constitution of the Federal Republic of Nigeria 1999 (Constitution), saying that the NNPC can by virtue of Section 7(4) of the NNPC Act defray all expenses incurred in the course of its business in the upstream operations.
Adoke stated that the NNPC is required to pay into the Federation Account the ‘net revenue’ as opposed to the ‘gross revenue’.
“I am therefore of the respectful view that only the net revenue from the upstream petroleum operations of the NPDC should be paid into the Federation Account by the NNPC. This is more so as the federating units do not contribute to the funding of upstream petroleum operations of the NNPC and its subsidiary,” he averred.
He however requested for more time to give his legal opinion on whether due process was followed by the NPDC in engaging Strategic Partners for the funding and operation of the oil blocks assigned to it by NNPC.
Suspended Governor of Central Bank of Nigeria (CBN), Malam Sanusi Lamido Sanusi, had pointed out the illegality of paying subsidy which violated a presidential directive on kerosene subsidy.
Abuja human right lawyer, Abubakar Sani, in his reaction said that the legal framework to subsidize was flawed as there is no law in Nigeria that requires government to subsidise the price of oil. According to him, what Section 6 of the petroleum act requires was that the petroleum minister should ‘fix the oil price’.
He said that the law that requires the petroleum minister to pay subsidy was illegal and unconstitutional, adding that it was the designation of a product type as essential that will validate any price control.
Barrister Sani said however that the blame also goes to the National Assembly that was supposed to designate oil as essential product whose price they seek to control.
Sanusi also alleged that the NNPC took away blocks belonging to the federal government and allocated same to itself through the use of the NPDC as a Special Purpose Vehicle (SPV).
He said the NNPC later transferred the operation to third parties/agents with limited experience in operating oil blocks.
The NPDC has been withholding income meant for the Federation Account, he said, adding that oil revenue which should accrue to the Federation Account from NPDC’s is being diverted to private companies – Atlantic Energy and Seven Energy.
According to him, there is a non-remittance of $6 billion crude revenue that ought to be remitted to the Federation Account by NPDC as part of the divested assets.
Committee chair, Sen. Ahmed Makarfi, said that he will ensure that the missing pages are given to the AGF to enable him address issue three, which is central to the committee’s investigation.
He said the legal opinion the committee seeks from the AGF is to determine what portion of the $6.7 billion ought to be remitted to the Federation Account.

“It is important that we get this right because those, who had made presentations said it was a legal and constitutional issue. As the chief law officer of the federation, although they fall within the internal workings of the ministry, it is necessary we get the opinion of the office of the AGF on this legal and constitutional issue,” Makarfi said.
He said although issues two and three were related, they are distinct. “One is that, if you have a property worth 1 billion, if you sell it for 100 million, you cannot begin to talk of how much you lost because you sold it at 100 million. You can talk of, maybe how stupid you were, because you were the one that sold it for 100 million.
“But where public property is concerned, the issue of whether due diligence was exercised in assigning or transferring the public property in such a way and manner that the revenue that should accrue to government was just and fair revenue.
Mrs. Nenadi Usman, a member of the committee described the AGF’s legal opinion as a wrong opinion as he did not have all the necessary documents to give the opinion.
She referred to page six of the AGF’s presentation and noted that by his (AGF’s) opinion, NPDC is required to pay only the net profit, which is the dividend to the NNPC for onward remittance to the Federation Account. She further noted that that position by the AGF is at variance with that of the NPDC boss.
Mrs. Usman noted that the NPDC boss said he was not expected to pay anything to the NNPC, and that all the funds given to him were to fund his budget.
When the NPDC boss confirmed that Mrs Usman’s observation was right about his position, she concluded that “it means even this legal opinion (by the AGF) is wrong.”
But when the AGF left the chamber, those present were still confused as they had wanted to hear specific figures; what is the “net revenue”?; how much did the NPDC and the NNPC receive?; who were the third parties and whether they received the monies said to have been sent to them?; did NPDC receive N6 billion from NNPC from February 2012 – July 2013?
Meanwhile the committee has adjourned till March and directed all parties to submit all relevant documents before Friday, February 28.