Amid growing concerns about declining oil revenue and transparency issues within the Nigerian National Petroleum Company Limited (NNPCL), President Bola Tinubu has initiated a series of sweeping reforms to enhance accountability in the oil sector.
The recent directive involves a fundamental shift in responsibility for crude oil sales, transferring oversight from the NNPC to the Central Bank of Nigeria (CBN).
Previously, the NNPC held exclusive control over crude oil sales, and critics argued that this arrangement lacked transparency, enabling the underreporting of earnings. Tinubu’s directive mandates the NNPC to submit all receipts for crude oil sales to the CBN for thorough vetting and documentation, aiming to eliminate potential gaps in reporting and ensuring accurate records of oil revenue.
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Mr. Olayemi Cardoso, the Governor of the CBN, noted during a keynote address at the launch of the Nigerian Economic Summit Group (NESG) “2024 Macroeconomic Outlook Report,” that the directive is part of collaborative efforts between the CBN, the Ministry of Finance.
“This coordinated effort will greatly enhance the Bank’s foreign exchange flows and contribute to the accretion of reserves,” he said.
The expected stability in the foreign exchange market for 2024 is attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the CBN. The reform aims to streamline and unify multiple exchange rates, fostering transparency and reducing arbitrage opportunities.
Cardoso believes that a consistent and stable exchange rate will boost investor confidence, attracting foreign investment and elevating Nigeria’s appeal to global investors.
“This reform is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage,” he said.
“The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors.”
The governor said that the CBN is implementing a comprehensive strategy to improve liquidity in the foreign exchange markets, addressing fundamental issues that have hindered effective operations over the years.
“We are implementing a comprehensive strategy to improve liquidity in our FX markets in the short, medium, and long term. Our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years.
“Upholding the integrity of financial markets is crucial for building confidence. With the completion of an independent forensic review, we are addressing the backlog of valid FX transactions and we remain steadfast in our commitment to decisively address any infractions and abuses,” he added.
This move to enhance transparency in the oil sector has received positive reactions from experts. Kelvin Emmanuel, an energy expert and a financial analyst, stated, “I think it is a good thing that the President has removed revenue collection of crude oil sales from NNPCL, even though the revenues are actually credited to the offshore account bank of the CBN.”
Despite the positive reception, he suggested that the federal government needs to take further steps. This includes urging the NNPC to transfer its shareholding in government-owned enterprises like WAGPCO & NLNG back to the Ministry of Finance.
Emmanuel also called for a complete business process re-engineering for the NNPC and a reassessment of the importance of its retail portfolio.
“I still struggle to see the importance of their retail portfolio (NNPCL retail is a labor of love),” he added.
In parallel with these efforts, the Nigerian government has already taken substantial steps towards reforming the oil sector. The implementation of the Petroleum Industry Act (PIA), signed into law by former President Muhammadu Buhari, is believed to be a landmark move aimed at restructuring the oil and gas industry in Nigeria. The PIA aims to promote transparency, attract investments, and ensure the sustainable development of the sector.
The PIA provides a legal framework for the NNPC’s transformation into a commercially viable and transparent entity. The Act seeks to eliminate inefficiencies and mismanagement within the oil sector, fostering a more competitive and accountable industry.
This is the most excellent decision made by this administration. NNPC has been shrouded with looting of the highest magnitude which is totally unacceptable. There have also been several cases of none remittance of crude oil sales to the central bank.
Ideally, the company that is producing should not be the one that is receiving the money and at the same time spending it. This is ridiculous.
Great! Do we now take it that, the CBN is our new’SAFE HEAVEN ‘.? Be assured that Nigerians are keenly watching the renewed hope agenda as time will surely tell.
NNPC has been like agent whey dey collect rent, spend it then ask landlord make im bring money to repair roof.
The decision is an applaud to the present administration as this will improve checks and balances, reduce bottlenecks in areas of accountability, and enable CBN monitor the inflow of foreign exchange generated from activities of NNPCL. At the same time reduce the monopoly of power control by the Corporation.
In the beginning of time, from oil operations, all crude and gas sales proceeds go directly into CBN controlled Accounts…Just like all other Federal revenue earning institutions, such as NPA, Customs, etc. After which, there’s a standing committee under the Federal Ministry of Finance that carries out monthly reconciliations…
Story!
Though it is a good idea, is there financial discipline in the staffs of CBN, just like lack of which NNPC was wanting, acussed of $billions missing?
Another important question how will FG monitor the actual production barrels of crude oil per day, FG shoud bring more oil drilling Rigs to increase our production of crude oil to 3/4 million barrels per day. How does FG monitors the 60% operating costs in oil industries to ensure no laxity and wastage and many more
Another important question how will FG monitor the actual production barrels of crude oil per day, FG shoud bring more oil drilling Rigs to increase our production of crude oil to 3/4 million barrels per day. How does FG monitors the 60% operating costs in oil industries to ensure no laxity and wastage and many more