Nigeria National Petroleum Corporation (NNPC) admitted before the Senate Joint Committees on Petroleum Resources (Upstream and Downstream) on Wednesday that it formally informed the Federation Account Allocation Committee (FAAC) of being insolvent. 

Group Managing Director of the corporation, Augustine Oniwon, told Senators that NNPC was insolvent because of a N1.156 trillion debt owed it by the Federal Government.   

Oniwon also noted that “NNPC is insolvent as current liabilities exceeded current assets by N754 billion as of December 2008 and so, NNPC is incapable of repaying the N450 billion owed to the Federation Account unless it is reimbursed the N1.156 trillion from the Ministry of Finance”.

But the committee after the meeting held that the corporation was not broke.

The Senate panel, chaired by Lee Maeba, rose from the hearing and concluded that the confusion that arose concerning the financial state of the NNPC last week resulted from the wrong use of the word “insolvent” which was not appropriately situated in context.

Oniwon had, however, submitted a letter he wrote to government stating that the corporation was indeed insolvent. 

He gave further details of how past Nigerian leaders took money from the corporation without recourse to due process. 

Oniwon who appeared along with Minister of State for Finance, Remi Babalola, to explain the controversy generated by the disclosure that the corporation was broke, said because of cash flow issues, it would not be able to pay the N450 billion it is owing the Federation Account. 

Incidentally, however, Oniwon told the Senators that although NNPC was in a position to pay the debt, it refused to do so because of the N1.5 trillion that the Federal Government, which owns 52 per cent of the Federation Account, owed it. 

He also stated how former Nigerian leaders directed the NNPC to release funds to various uses without recourse to the National Assembly over the years amounting to the N1.5 trillion which the corporation is claiming from the Federal Government. 

Narrating how the N1.5 trillion being claimed from the Federal Government accumulated, the NNPC boss stated, for instance, that when the Department of Petroleum Resources (DPR) was to be established, the then President directed the NNPC to release N651 million for the take-off but that it has never been refunded. 

Again, he said when a sugar company was to be established, the President (unnamed) again asked them to release another $18 million which also has never been refunded to date. 

In the letter addressed to Babalola, a copy of which was submitted to Chairman of the joint committee, Lee Maeba, Oniwon specifically noted that “NNPC is facing financial difficulties evidenced by among others, the inability to pay for domestic crude as at when due and delays in settling bills for fuel imports; the financial difficulties essentially stem from disequilibrium between costs and cash inflow streams; that the corporation is owed substantial amounts as un-reimbursed subsidy on petroleum products. 

“NNPC spends increasing sums of money in repairing/replacing vandalised assets and is suffering from product loses arising there from; the cost of holding strategic reserve of petroleum products on behalf of the Federal Government, including demurrage are borne by NNPC”, he stated. 

Oniwon further noted that “NNPC is insolvent as current liabilities exceeded current assets by N754 billion as of December 2008 and so, NNPC is incapable of repaying the N450 billion owed to the Federation Account unless it is reimbursed the N1.156 trillion from the Ministry of Finance”.