Scroll to Top

$25biliion Oil Contracts: You are Economical with the truth-Baru Replies Kachikwu

Group Managing Director of the NNPC, Dr. Maikanti Baru, on Monday formally reacted to the allegations of insubordination leveled against him by the Minister of State for Petroleum Resources, Ibe Kachikwu, in a leaked memo to President Muhammadu Buhari.

Mr. Kachikwu had in the memo, accused the NNPC GMD of insubordination and award of oil contracts to the tune of $25 billion without following due process.

Though President Buhari met with the Minister last week while Vice President Osinbajo met with the NNPC GMD, there was no official statement from the Presidency about the face-off between Kachikwu and Baru, came to the fore.

In a statement stating the NNPC side of the imbroglio, signed by Ndu Ughamadu, Group General Manager, Public Affairs, Baru noted that “the law and the rules do not require a review or discussion with the Minister of State or the NNPC Board on contractual matters.”

The statement said, “Following the publication of alleged lack of adherence to due process in the award of NNPC contracts, the President ordered the Group Managing Director (GMD) and Management of the Nigerian National Petroleum Corporation (NNPC) to consider and respond expeditiously to the allegations.

“The substance of the allegations made by the Minister of State for Petroleum Resources, in a letter to the President dated 30th of August 2017, is that a number of “major contracts were never reviewed or discussed with me (sic) the NNPC Board

“It is important to note from the outset that the law and the rules do not require a review or discussion with the Minister of State or the NNPC Board on contractual matters.

“What is required is the processing and approval of contracts by the NNPC Tenders Board, the President in his executive capacity or as Minister of Petroleum, or the Federal Executive Council (FEC), as the case may be.

“There are therefore situations where all that is required is the approval of the NNPC Tenders Board while, in other cases, based on the threshold, the award must be submitted for presidential approval. Likewise, in some instances it is FEC approval that is required.

“It should be noted that for both the Crude Term Contract and the Direct Sale and Direct Purchase (DSDP) agreements, there are no specific values attached to each transaction to warrant the values of $10billion and $5billion respectively placed on them in the claim of Dr. Kachikwu.

“It is therefore inappropriate to attach arbitrary values to the shortlists with the aim of classifying the transactions as contracts above NNPC Tenders Board limit.

“They are merely the shortlisting of prospective off-takers of crude oil and suppliers of petroleum products under agreed terms.

“These transactions were not required to be presented as contracts to the Board of NNPC and, of course, the monetary value of any crude oil eventually lifted by any of the companies goes straight into the federation account and not to the company.

“Furthermore, contrary to the assertion of Dr. Kachikwu that he was never involved in the 2017/2018 contracting process for the Crude Oil Term Contracts, Dr. Kachikwu was in fact expressly consulted by the GMD and his recommendations were taken into account in following through the laid down procedure.

“Thus, for him to turn around and claim that ‘…these major contracts were never reviewed or discussed with me…’ is most unfortunate to say the least.

NNPC Contracting Process:

The contracting process in NNPC is governed by the following:
i. Provisions of the NNPC Act
ii. The Public Procurement Act, 2007 (PPA)
iii. Procurement method and thresholds of application and the composition of Tenders Board as provided by the Secretary to the Government of the Federation (SGF)

Circular reference no. SGF/OP/1/S.3/VIII/57, dated 11th March, 2009.
iv. NNPC Delegation of Authority Guide
v. Supply Chain Management Policy & Procedure documents
vi. NNPC Ethics Guide

Table 1: Financial Authority Threshold (SGF Circular (iii) above)
Approving Authority/No Objection to Award Special Works (NNPC)
BPP issues “No objection to award”/FEC approves N2.70 billion (USD 20M) and above
NNPC Tenders Board Up to N2.7 billion (USD20M)

Table 2: Composition of Tenders Board (SGF Circular (iii) above)
Ministry Chairman Permanent Secretary
Members Heads of Departments
Para-statals Chairman Chief Executive
Members Heads of Departments

NNPC had cause to clarify severally from Bureau of Public Procurement (BPP) as to the composition of NNPC Tenders Board and the role of NNPC Board appointed by Government. The following clarifications were made.

  1. The BPP expressly clarified that NNPC Tenders Board (NTB) is NOT the same as NNPC Board. The governing board (NNPC Board) is responsible for approval of work programmes, corporate plans and budgets, while the NTB is responsible for approval of day-to-day procurement implementation.
  2. BPP referred to the SGF circular for the composition of the NTB to compose of the Accounting Officer (GMD NNPC) as the Chairman, with Heads of Department (GEDs) as members with the Head of procurement (GGM SCM) serving as the Secretary of the NNPC Tenders Board.

The above clarifications of the provisions of the procurement process show that approvals reside within the NTB and where thresholds are exceeded, the NNPC refers to FEC for approval. Therefore, the NNPC Board has no role in contracts approval process as advised by BP

As can be seen, all these clarifications were sought and obtained prior to August, 2015 and were implemented by Dr. Kachikwu as the GMD of NNPC. Dr. Kachikwu also constituted the first NNPC Tenders Board on 8th September, 2015 and continued to chair it until his exit in June, 2016.

Typical NNPC Contracting Process:

  1. Approval of project proposal and contracting strategy by NTB.
    2. Placement of adverts for expression of interest in electronic and print media.
    3. Soliciting for tender (Technical and Commercial)
    4. Tender evaluation
    5. Tender approval by NTB for contracts within its threshold; otherwise
    6. Obtain BPP certificate of no objection before presentation to FEC.
    7. Present to FEC for approval.
    All Contracts in NNPC follow the above procedure.

Specific Contracts Mentioned in the Honourable Minister of state for Petroleum Resources (HMSPR) letter to Mr. President.

  1. Crude Oil Term Contract (COTC) – valued at over $10bn
    It is important to state that the COTC is not a contract for procurement of goods, works or services; rather it is simply a list of approved off-takers of Nigerian crude oil of all grades.

This list does not carry any value, but simply state the terms and conditions for the lifting. It is therefore inappropriate to attach a value to it with the aim of classifying it as contract above Management limit.

In arriving at the off-takers list for 2017/2018 COTC, the following steps were followed:
a. Adverts were placed in National and International print media on Monday, 17th October, 2016.
b. The bids were publicly opened in the presence of all stakeholders (NIETI, DPR, BPP, Civil Society Organizations, NNPC SCM Division and the press as well as live broadcasts by the NTA and other TV stations).
c. Detailed evaluation was carried out and the short list of the successful off-takers was presented to the approving authority (Mr. President) for consideration and approval.
d. Thereafter, NNPC published the list of the successful off-takers in newspapers and NNPC’s official website.

“This has been the standard procedure and it is the same process adopted during the 2016/2017 COTC when the HMSPR was the GMD”.



Like it? Share it!

Leave A Response