The World Bank has offered Nigeria and other countries that have State Owned Enterprises (SOEs) potential solutions to corrupt and incompetent practices in their respective public institutions. It stated this in a recently report titled, ‘Enhancing Government Effectiveness and Transparency: The Fight against Corruption.’, the global lender stated that corruption in SOEs has gained prominence in recent years due to high-profile scandals in countries like Brazil, South Africa, Angola, and Malaysia.
The bank explained that corruption risks in SOEs arise from various sources such as monopoly or quasi-monopoly rights which provide an opportunity for abnormal profit generation. It also said risks arise in SOEs from weak legal and regulatory frameworks, corporate governance weaknesses, lack of transparency and disclosure of finances as well as limited effective government and citizen oversight.
It could be recalled that the Nigerian National Petroleum Corporation and the Nigerian Liquified Natural Gas Company has come under scrutiny in recent times over allegations of non remittances to government purse and poor accountability and transparency issues.
According to the World Bank, corrupt acts committed in SOEs with these shortcomings have defining effects on the economies of countries and government’s abilities to provide critical public goods and services. It noted that phasing or sequencing of SOE reforms based on their political and institutional feasibility can help overcome entrenched interests and provide confidence to policy makers to take further steps.
The House of Representatives last month summoned the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mr. Mele Kyari and Governor of Central Bank of Nigeria (CBN), Mr Godwin Emefiele over non-remittance of N3.235 trillion ($19.253 billion) revenue accrued from sales of domestic crude oil in 2014. Chairman, House Committee on Public Accounts, Wole Oke issued the directive during the investigative hearing into the audit queries issued by the office of the Auditor General of the Federation (oAuGF) for the period under review.
This is coming barely 10 days after the NNPC Group Managing Director refused to honour the invitation sent to him penultimate week, on the withdrawals of $20.301 billion from the Nigerian Liquefied Natural Gas (NLNG) Dividends account. According to the details of the query, oAuGF observed that from the “examination of NNPC mandates to CBN on Domestic Crude Oil Sales and Reconciliation Statement of Technical Committee of Federation Account Allocation Committee (FAAC) meeting held in January, 2014 that a total sum of N3,234,577,666,791.35 was not remitted to the Federation Account by NNPC within the period under review.”
The oAuGF findings further showed that, the “cost estimated for crude and product losses was N55,964,682,158.99 which is about 50 per cent of pipeline management cost of N110,402,541,010.88, names of contractors, location and amount paid to each for the pipeline maintenance were not sighted for audit verification.
“Over 31 per cent ( N826, 506, 271, 231. 26 divided by N2,636,390,514,777.18 multiplied by 100 per cent) of the realized crude sales for the year were earmarked as other expenses apart from direct cost of productions stated in NNPC reports for the year 2014. The breakdown of other expenses was not provided for audit. “From the above analysis, it means that the Federation Account is losing 31 per cent (N826,506,271,231.26) being additional estimated cost from the total amount that should have accrued to Federation Account.
From the total revenue of N3,234,577,666,791.35 as of January 14, 2015, payable to the Federation Account by NNPC during the year, the Corporation deducted the sum of N826,506,271,231.26), that is, N660,139,048,061.39, N55,964,682,158.99 and N110,402,541,010.88) for subsidy estimate, crude and product losses and pipeline management cost), respectively, at source, thereby resulting to net amount withheld figure of N2,408,041,395,560.33. All these deductions at source by NNPC were not approved by FAAC,” the audit query read in part. While requesting the Accountant General of the Federation to inform the NNPC Group Managing Director to explain the flagrant attitude of withholding domestic crude oil sales revenue by NNPC which should be refunded immediately, the oAuGF observed that there was no positive response on a similar issue raised in 2012.
The World Bank thus suggested that, “opening up markets to greater competition to reduce monopoly power and market share and incentivise financial and fiscal discipline, strengthening SOE legal and regulatory frameworks and practices, building a commitment to good governance and capacity of state-owned entities,” could help improve integrity in the SOEs.
It also proposed that, “professionalising the SOE board of directors and senior management, establishing effective internal controls, compliance, and risk management, promoting transparency and full financial disclosure, including of SOE debt,” are other measures that could cut down corruption in SOEs.
The World Bank warned that, “reforming governance of SOEs alone may not always be enough to prevent corruption and assure efficiency,” adding that breaking large SOEs into smaller units for greater efficiency could be adopted as well. The World Bank suggested that, “where privatisation or private sector participation is not a viable option, SOEs can still be exposed to capital market discipline through partial listings.”