BY

DONALD IKENNA OFOEGBUCENTER FOR SOCIAL JUSTICE, ABUJA

For twitter - @CENSOJ

The Ministry of Petroleum Resource; the Ministry’s 2014

Budget Proposal and the Vision 20 20:20 Attainment

Nigeria’s Oil and Gas and the Budget.

With a Total Budget Expenditure of N4.6 trillion proposed for 2014, it is expected that 57% of its funding comes from the oil and gas

earnings. So on a lighter note, we can implicitly say that 57% success of the budget

depends on the performance of the oil and Gas Sector; forgetting the implementation

part of the budget process.

The Vision 20: 2020

Nigeria is only six years away from attaining the year 2020; when it targets to have become one of the 20 leading economies of the world. The vision 20:2020 is Nigeria’s long term developmental objective. Attaining this vision 20:2020 for Nigeria in real term should be evidenced in improvements in the standard of living of the average Nigerian; steady power supply, real and sustainable employment of the Nigerian youths, accessible and affordable quality education and healthcare system, good road and transport network, viable and competitive manufacturing industries, bountiful agricultural sector, a vibrant private sector and improved security. The actualisation of all these depend greatly on the activities in the oil and gas sector of the country since more than half of the revenue needed to fund the 2014 budget like earlier budgets depend on the state and manner in which the oil and gas industry is handled...so far, both records and media have proven that the sector is being mishandled.

The strategic planning framework of the county is anchored on the Nigerian vision 20:2020 developed in 2009. To be actualised through the implementation of 3 medium term strategic plans: 1st NIP (2010-2013), 2nd NIP (2014-2017) and 3rd NIP (2018-2019); then the Transformation Agenda (TA) 2011-2014. The agendas of the framework are to be actualized through the annual implementation of ministerial/sectorial budgets; set in tandem to priori standards.

So if over 50% of the Funding and Management of the Annual Budgets depend on oil and Gas Sector, then the ministry in charge of this sector has over more than half the success of the vision 20:2020, and stands in-charge of catalysing the transformation.

The Ministry of Petroleum Resource.

The Ministry of Petroleum Resources (MPR) has the sole mandate to ensuring that the oil and gas sector of the country is positioned at optimal operation to benefit the entire Nigeria by initiate policies for the oil and gas sector and supervise the implementation of approved policies. The Agencies and Parastatals under the supervision of the Ministry also ensure the execution of the approved policies for the sector. Thus the MPR ensures that revenue of oil and gas are optimally extracted and secured to the treasury. It does this by utilizing resources (policies and expenditures) to ensuring that timely accountability and transparency is present in the upstream and downstream sector, facilitating a harmonious oil and gas environment for both host and operating oil firms.

The Issues in the Oil and Gas Industry

Widening Revenue Leakage: “Nigeria’s oil theft peaks at 300,000bpd” – DG BOF (2014)

Loosing 300,000bpd at $77.50 per barrel is a huge loss of $23,250,000 worth of income {At N160/$, this amounts to N3, 720,000,000 (N3.72 Trillion}; sufficient to cover both Recurrent (N2.4trillion) and Capital (N1.1 Trillion) expenditures of the 2014 budget.

Non-Remittance of Funds i.e. By the NNPC (alleged $10.8 Billion or N1.73 Trillion); resulting from either unavailability, uniformed and poor accounting records, political corruption and embezzlement, or the lack of managerial capacity on the part of the agency

For instance, the inability of the Minister of Petroleum Resource to explain how N1.7trillion was allegedly paid to oil marketers for bogus fuel subsidy claims in 2012. Also, NNPC alleged failure to remit $4.84 billion, about N726billion to the Federation Account between 2009-2011.

Bogus fuel subsidy claims and illegal subsidy deductions by the NNPC Recall; the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) at a presentation before the House of Representatives, disclosed that, by Appropriation Act 2011, the NNPC is to be paid N81.720 billion from January – September 2011. However, the NNPC deducted N615.670 billion, which shows a difference of over N533.950billion.

Non-passage of the Petroleum Industry Bill; engineered to restructure the industry and forward its practices towards transparency, accountability, effective monitoring and good conscience.

Gas master plan which is currently enslaved by the continuous gas pipe vandalization which has added in crippling power generation in Nigeria

Sales of all four Refineries by 2014.

TA and the MPR Budget Proposal of 2014

The Agenda for the Oil and Gas Sector in Transforming and Actualizing the vision 20:2020 includes the promotion of private sector investment in both upstream and downstream activities of the oil and gas industry, deregulation of the industry and promotion of environmentally friendly oil and gas exploration and methods, strengthening capacity building programmes in core technical areas, provision of funding mechanisms for pre bidding geosciences and survey of deep water offshore. Reducing gas flaring, ensure adequate gas supply and increase gas revenue, and local content development.

The Oil and Gas sector under the guidance of the MPR has a total of 15 projects (9 New Projects and 6 Ongoing) to be financed at the estimated cost of N797, 500billion. Twelve of the projects are tagged KPPP (Key Priority Programmes and Project) at an estimated cost of N98,500billion; to be funded by On-Budget Public Fund, Off-budget Public Fund and Private Sector.

Following the phasing of programs and projects for the period 2012-2015, the supposed aggregate budget funding for the oil and gas sector/ministry in 2014 according to the transformation agenda should be a capital sum of N24.75billion for the KPPP.

In the proposed 2014 budget, the Ministry of Petroleum Resource presented a budget of N61,928,122,676 (N61.9billion; that is 1.33% of the AGGREGATE BUDGET; while ministries such as Interior (3.25%), Finance (35.61%), Office of National Security Advisers (2.38%) and Niger Delta including NDDC (2.39%) had these percentages respectively.

Of the proposed N61.9billon proposed for the ministry of Petroleum Resource only 10.5% (N6.22billion) is for capital projects, while the remaining 89.95% (N55.71billion) goes to the recurrent administrative cost.

TOTAL BUDGET FOR THE MPR

N61, 928,122,676

89.95% (N55.71BILLION)

IS SPENT ON RECURRENT EXPENSES.

10.5% (N6.2bn)Capital

Expenditure

% of Administrative Capital

It is obvious that N6.2billion appropriate for capital budget will in no way be sufficient to actualize the implementation of the Transformation in the sector for

2014; as did previous budget estimates.

The N6.22 billion is not only four time smaller the needed N24.75billion, its carries along administrative capitals and

wastages.

For instance considering the line items of the Ministry of Energy (Petroleum Resource)- HQTRS, we have overblown cost of anonymous travel (local and international travel ‘OTHERS’ – summing N82.50million). Within the HQTR’s capital expenditure, 10% of the proposed capital sum is for purchase of office furniture and fittings.

Refreshment and meal N29, 717,632, Annual Budget Expenses and Administration N10, 908,128, after allocation of

N9.42million for Budget Preparation. Fumigation worth N10.69million for the year, and Project monitoring worth N110.57million, Survey on oil and gas utilities production utilities in Nigeria (N48.1million).

A similar pattern also exist in its sub agencies, the Department of Petroleum Resource whose capital expenditure of N2.27billion, is eroded by administrative capital worth N1.3billion for construction and provision of office building in the Abuja headquarters and N100million for monitoring and evaluation.

The Nigerian Content Development and Monitoring Board’s capital of N210, 569,530 is cleared by purchase of generator worth N94.92million and an ongoing computer software acquisition of N115, 650,000, for the Nigerian Joint Qualification Scheme. A Total of N102.34 have been provided for local and international travel.

0232001001 MINSITRY OF ENERGY (PETROLEUM RESOURCES) HQTRS22020103220201042202010122020102

INTERNATIONAL TRAVEL & TRANSPORT: TRAINING INTERNATIONAL TRAVEL & TRANSPORT: OTHERS LOCAL TRAVEL & TRANSPORT: TRAINING LOCAL TRAVEL & TRANSPORT: OTHERS

45,535,48032,998,97956,795,07849,504,834

Allocating N184,834,371 for travel alone, with the weight from unspecified other, is wasteful and should be reduced by 50%

92,417,185.5 92,417,185.5

22020301 OFFICE STATIONERIES / COMPUTER CONSUMABLES

33,720,829 Are these stationary different from papers, pen, pencil, ruler, clips, pins, CDs, envelopes, markets, and paper tapes. What more? Reduce by 50%

16,860,414.5 16,860,414.5

22020406 OTHER MAINTENANCE SERVICES 2,348,426 Reduce by 90% as other maintenance provisions have been covered.

234,845.6 2,113,583.4

22020708 BUDGET PREPARATION 9,418,927 Remove completely as it is the duty of the accounts and finance departments to get this done.

0 9,418,92722021014 ANNUAL BUDGET EXPENSES AND

ADMINISTRATION 10,908,128 0 10,908,128

22021001 REFRESHMENT & MEALS 29,717,632 Allow private sectors to come in. 0 29,717,632

22021009 SPORTING ACTIVITIES 17,011,784 Allow private sectors to come in. 0 17,011,784

22021007 WELFARE PACKAGES 65,793,854 Remove completely as such pay is unconstitutional, illegal, expands the income inequality gap and wasteful.

0 65,793,854

0232002001 DEPARTMENT OF PETROLEUM RESOURCES220201022202010

LOCAL TRAVEL & TRANSPORT: OTHERS

LOCAL TRAVEL & TRANSPORT: TRAINING

289,545,078

71,599,130

Allocating a whooping N361,144,208 is annoying and inappropriate. Observing the line items, it is obvious that the overcost is coming from the unspecified ‘OTHERS’. Reduce by 70%

108,343,259.4 252,800,945.6

0232003001 PETROLEUM TRAINING INSTITUTE22020307 DRUGS & MEDICAL SUPPLIES 1,203,162 A duplication of the NHIS provision. Remove

completely.0 1,203,162

22021004 MEDICAL EXPENSES 3,278,637 0 3,278,63722021009 SPORTING ACTIVITIES 1,443,979 Allow private sectors to come in. 1,443,979

0232007001 NIGERIA CONTENT DEVELOPMENT AND MONITORING BOARD22020307 DRUGS & MEDICAL SUPPLIES 1,595,491 A duplication of the NHIS provision. Remove

completely.0 1,595,491

22021004 MEDICAL EXPENSES 1,595,491 0 1,595,49122021007 WELFARE PACKAGES 1,063,661 Remove, as it is not recommended or written in

any Nigerian law as a type of remuneration.0 1,063,661

0232009001 NIGERIA NUCLEAR REGULATORY AUTHORITY22021007 WELFARE PACKAGES 5,594,856

The Question:

How do all of these add up to benefitting the poor Nigerian masses?

Do these provisions help in plugging the leakages caused by oil theft and vandalism?

Do these line items provide for a more standardised accounting system that will save Nigerian from the stories of non remittance of fund by the NNPC?

Or make available an open access to data and information’s; records of the oil marketer who enjoy the subsidy payments?

Have they increased the surveillance of oil and gas pipes, provide sums for litigations or fuel?

Why have the reporting of the sector in the budget implementation reports been so inconsistent, adding frustration to a low petroleum sector implementation rate at only 19.29% of released sum.

These are inappropriate and calls for a speedy recall of the ministry.

Summary & Conclusion

These are the need to emphasise that the Nigerian oil and gas sector, coordinated by the Ministry of Petroleum Resource, have settled in a state of decline, with an urgent call for a total restructuring of the industry. Having looked at the structure of the ministry and its sub agencies, it becomes obvious that both ministries and following agencies and departments, lack the right initiative, strength, and direction to champion the Nigerian economy to the attainment of vision 20: 2020.

The budget was rather silent on the initiation and rehabilitation of gas pipelines, or gas master plan initiative, clear provisions for host communities were not listed, the capital projects of the departments and agencies are crowded by administrative capital, etc. provisions to cater for accurate accounting and transparency were neither incorporated or though after. While the oil theft continues to soar, along with the practice of non remittance of funds as and at when due, would never actualise the Vision 20:2020 goal for the sector.

Problems in the Ministry of Petroleum Resource, is more overwhelming than the ministry, in other words, the ministry lacks technicality, will power or conscience to channel the oil and gas sector to the vision dream.

In Recommendation

(1) Increased and practical drive to ensuring the realisation of the PIB Act, to restructure the oil and Gas sector as it is. (2) All avenue of leakages must be blocked by ensuring transparency and accountability:

How – (a) Public declaration and release of all the oil marketers and importers who fuel; their names, vessel/cargo numbers, capacity and purchase documents on monthly bases (b) Removal of all forms of non-security personnel’s from securing the oil pipes and facilities, the government can ensure this by creating real and sustainable jobs .i.e processing and assembling plants to keep ex-militants employed. (c) While the figures of oil theft is on the rise, the initiation of bunkery as recently proposed should be halted as most of the theft involve oil ship vessels- practicing theft under the umbrella of bunkery(d) If the 4 oil refineries must be sold they must be publically quoted on the stock exchange for all Nigerian, with the management outsourced to expert refiners. (e) Employ a rotational and specialised security team from the Armed Forces to oversee the oil facilities and equipments. (f) The media should ensure that culprits are named and shamed.