80% of Constituted Board Members not Experts in Petroleum Industry, Says Animashaun

Oru Leonard

The Principal Partner, Primus Partners and Solicitors, Mr. Najim Animashaun has said that 80% of the recently constituted Board members of the Nigerian National Petroleum Corporation (NNPC) do not have expertise in the petroleum industry.

Mr. Animashaun stated this in a recent online Masterclass on the Nigerian Natural Resource Charter (NNRC) and said that the Corporate Governance of the Nigerian National Petroleum Corporation (NNPC), might improve if board members are largely independent and selected based on technical capacity and competence.

He noted that the Corporation does not have an independent board with experience to drive growth as the present board gives room to political interference.

He advised that board members can be recruited from outside the government to bring the right skills needed for effective decision making.

Explaining further, Animashaun said, “The NNPC Board is not technical. Neither are independent Board Members independent. Current Board has 2 politicians with no real petroleum sector expertise. 80% of board members have no real expertise in the petroleum sector.

“Provisions for constituting the NNPC Board are stipulated in the NNPC Act, which provides for the Minister of Petroleum Resources to act as Chairman of the board. It also provides for a representative of the Ministry of Finance but leaves little room for executive directors, with only the GMD of the NNPC represented on the board.

“While the act allows for private sector participation, there is no representation of private actors on the current NNPC Board. Consequently, the set-up by design and practice make for a heavily government-oriented board, also reflecting the ownership structure.

“Little wonder the set-up described above freely allows for political interference. The minister, who is responsible for policy in the industry, being Chairperson of the board, may be driven by policy considerations at best and political considerations at worse.

“While the current Constitution does not violate the act, NNPC corporate governance might improve if board members are largely independent and selected based on technical capacity and competence. This can be done by recruiting board members from outside the government to bring the right skills needed for effective decision making”, he said.

On staff Integrity and capacity, Animashaun said that improving the competence of staff through training and providing incentives can safeguard against narrow rent seeking and promote overall organisational effectiveness.

He remarked that recruitment into the Corporation as well as appointments to key positions still appears to be subjected to political patronage, socio-ethnic, and religious considerations, adding that some laws and regulations require equal staffing considerations from all 36 States of the Federation.

“The NNPC has one of the more robust remunerations and professional development structures among Nigerian public service organisations. The NNPC’s Leadership Academy was established to provide technical, managerial and executive training within and outside the corporation. In the past, the corporation has publicized its staff anti-fraud training activities. However, it is not clear that the corporations’ investment in staff capacity translates into staff integrity”, he added.

On the role of the NNPC, he noted that the Corporation dabbles into all spheres of the petroleum industry, specifically in operation, regulation, and policy, by virtue of its position, this he said, is likely to lead to conflict of interest, lack of focus, inefficiencies, and underperformance.

“Although there is no provision delineating activities that NNPC cannot carry out in the act, its engagement in areas outside its core competencies may be a driver for the poor performance observed in these areas.

“Moreover, branching outside of the petroleum industry may lead to waste in human and financial resources on a wide range of ill-suited activities that fail to generate returns for the country”, Animashaun added.

On Financial Audits of NNPC, Animashaun stated that of the five National Oil Companies reviewed, only NNPC does not have routine audits and publish its accounts, adding that four of the five engage top tier auditors.

He added that the lack of a culture of openness and disclosure within the system is partly responsible for the poor record-keeping, the lack of checks and balances, ineffective performance reviews and audits, and the absence of transparency and accountability in the NNPC.

“The NNPC has maintained the practice of disclosing selective and unaudited monthly operational and financial performance data since 2016. Despite the disclosure of information by NNPC in recent times, it is important to examine the implications and unintended consequences of increased information disclosure. Specifically, shining light on some information may leave other issues in darkness.

“Historically, the government does not seem to value transparency and has not meaningfully sought it from the NNPC or investigated wrongdoing in a way leading to consequences or penalties. This extremely weak transparency and accountability culture means neither staff nor decision makers are incentivised to be transparent”, exressed

In order to achieve an efficient NOC in Nigeria, Animashaun called for the passage of the Petroleum Industry Bill (PIB)—to make commercial efficiency the objective of the new NOC; Capitalise the NOC adequately; Recruit international expertise to the New NOC—at Board level and at Management level; Remove NNPC’s statutory discretion to ‘engage in all commercial activities’ in petroleum industry; and Focus on developing NNPC’s strength.