Nigeria’s government backtracked Wednesday on claims that its state petroleum firm was insolvent, raising new questions over the oil-rich nation’s squandered resources and the role corruption has played.
The reversal came a day after the junior finance minister labeled the Nigerian National Petroleum Corporation (NNPC) insolvent, prompting an angry response from the firm, which blamed the government for its woes.
According to the company, the government has not paid it more than six billion dollars in subsidies, which are supposed to be provided in exchange for holding down petrol prices in Africa’s most populous nation.
The controversy has played out against the backdrop of an approaching election season, with a presidential vote set for early next year in the OPEC member, the world’s eighth-largest oil exporter.
“To say it’s insolvent, as you know, is incorrect,” Finance Minister Segun Aganga told journalists on Wednesday.
However, he did not provide an explanation for why he was now contradicting his junior finance minister, Remi Babalola, nor did he address the issue of the subsidies the NNPC said had not been paid.
Babalola had said that NNPC was insolvent due to liabilities exceeding assets by 754 billion naira (five billion dollars, 3.9 billion euros).
NNPC immediately disputed the claim, saying the government owed it more than six billion dollars in subsidies.
On Wednesday, NNPC spokesman Levi Ajuonuma responded angrily to the junior minister’s statement, saying that labeling the firm insolvent amounted to calling the country bankrupt, because of its reliance on the oil industry.
“Anybody saying NNPC is broke, you are indirectly telling the world that Nigeria is broke, don’t do business with Nigeria,” he told AFP.
“It is a very serious matter. NNPC is not broke. Nigeria is not broke.”
Because of the poor state of Nigeria’s refineries, the company has to import products from abroad and pay market price. It must then charge a fixed price for petrol, a situation that has created the problem, according to NNPC.
But the controversy has led to inevitable questions about what role corruption has played in NNPC’s affairs in a country long held back by graft.
“Economically, there is no basis for NNPC to go bankrupt,” said oil industry expert Gbenga Martins. “Corruption is the bane of NNPC, which has landed it in its current situation.”
Cletus Nwogwugwu, an Abuja-based economist, agreed that the NNPC “because it is inefficient and swimming in corruption… does not have a good standing to say that it cannot pay its bills.”
The government’s reversal drew even further criticism, with one observer saying the country’s credibility was again damaged.
Financial analyst Gboye Bankole also said “it gives a feeling that there is a cover-up on the finances of the NNPC.”
The government is seeking to reform the petroleum industry, the source of an estimated 90 percent of export earnings and 80 percent of government revenues.
A reform bill is currently before the parliament and the government wants to wean the NNPC off subsidies.
President Goodluck Jonathan, who took over in May after the death of his predecessor Umaru Yar’Adua, recently sacked two top officials of the NNPC and ordered an audit of its accounts.
He has also promised to cut down on corruption and reform the oil sector to make it efficient and profitable — a daunting task given the NNPC’s situation.
Meanwhile, Nigeria’s inability to capitalise on its oil wealth continues to cause frustration in the country of 150 million people.
Its four refineries grossly underperform due to corruption and poor maintenance. As a result, the country faces fuel and electricity shortages, with power outages a daily part of life.