Not long before we entered this century, and some few years into it, something sad and frightening began to happen frequently in the corporate world of Europe and USA: one big firm fell after the other in frightening close succession, shattering in the process dreams and erasing savings, pension and associated security of workers, investors and other stakeholders. The trend though not as rapid and high today, has nonetheless continued.
But it was not exclusively an American/ European phenomenon. In Nigeria, we recall the fall of Etisalat and much earlier the take over of Arik Air to save it from collapse. In fact, by 1999, most of the public enterprises in Nigeria had withered leading to their sales at give -away prices. As the fate of companies such as Dot.com, Enron, Delorean, Panam, Fannie Maed, Freddie Mac, North Bank etc. has shown, in this withering game, no organisation is too big or too small to fall or to die. The effect was largely the same- calamity galore for all stake holders and society alike
While all organisations are vulnerable , the failed companies suffered from a common disease – corporate mis-governance with disastrous effect on the economy. Corporate – unleashing in its wake unemployment, family gloom, and great threat to our collective future.
Investigations were carried out and some useful lessons learnt. Culprits were identified and punished and measures were laid to prevent recurrence. One of the lessons learnt was that human failure understood in terms of violation of the rule of the game was the main cause of the disaster in the corporate world. More specifically, laid structure, rules and regulations, due process were not observed by those who should. Generally, the Boards of many of the failed companies did not play their supervisory role well. As it were they were asleep when rules and regulations were being violated and unethical conduct perpetrated in the corporate world by management team.
A great lesson learned was the need to take corporate governance much more seriously by holding CEOs in check and accountable to all stake holders. It became clear that a society could only ignore corporate governance at its own peril.
Why this journey to the past-a sad past? It is to draw attention to a lurking danger around us as result of ripple of fear rocking Nigeria’s Oil House Abuja due to the deep administrative rift between the Minister of State Petroleum Dr Ibe Kachikwu and Dr Baru, GMD NNPC. The world knew that all was not well with the NNPC from a leaked letter written to Mr President by Dr Kachikwu. The unrepentant but unconvincing response of the NNPC to Minister’ allegations confirmed the fear of serious administrative rift between the Minister and the GMD – two top most players in the House of Oil.
There is no doubt that a raging fire was burning in the house of oil. Instead of cooperation to use power for the good of the company, there has be undue competition for power and show of it for vain reasons. It was an alarming red card being served the country. The company’s corporate governance was under serious threat. A big governance crisis was brewing at the oil house which could have adverse effect on the economy as a whole. In fact no one reads the Minister’s letter and the harsh or defiant reply to it by the NNPC would go without high feeling of discomfort and apprehension.
While It was easy to see from the letter, examples of alleged violation of due process, some acts of impunity, lack of consultation on key issues of corporate governance, as explained below, the NNPC’s reply was unconvincing. Whatever, the development would not allow efficient administration and effective management and due process “to thrive at the NNPC- a company which according to the Minister has had “a history of malpractices and negative public perception of non- transparency”. There was fire on the mountain requiring quick action to extinguish it. The return of the long queue for fuel at the Gas Filling Stations in this festive period, indicating fuel shortage in an oil rich country, serves as a good reminder that all was not well with corporate governance at the NNPC.
There are many reasons we should be interested in the NNPC crisis not the least being the high profile role of the company in the economy and the serious threat of the crisis to our collective well being. Most of the failed organisations start with some crisis.No matter how one looks at it, there has been feud between the of State Petroleum Resources and the GMD of NNPC. It means fire on the mountain -top of the NNPC.
In particular there has been alleged violation of rules of engagement. The Minister, whomis also the Chairman NNPC’s Governing Board accused the GMD of “blatant insubordination and disrespectful attitude” and of “bravado management style that does not consult the Board on critical issues of governance such as appointments of staff and award of contracts, or meet the standards of integrity and creating in the process a “fear culture in the NNPC”. These are very serious allegations.
Though on its part, the NNPC management said there was nothing new or wrong with its operations, yet the severity of the allegations and defiant nature of the response to them by management suggest a murky season at the oil house. There is thick, dark smoke coming out from the top of the building. As we know oil is not an extinguisher of fire but its inflamer.
If nothing else there has been serious communication problem which would not enhance good corporate governance in the company. There is therefore genuine reason for worry because given the NNPC’s hold on the nation’s revenue, a set back to the company is great set back to the nation at large. Truly, a fire in the oil house is not like any other fire out- break: it is tantamount to a conflagration of the whole country and thus a big threat to us all. In a word, it is dangerous given the critical role of oil in the life of the country.
The interest in the NNPC should therefore be self- evident. The company is of great strategic importance to the progress and prosperity of the country today. For this alone, every citizen ought to be interested in the governance of the NNPC. Apart from its strategic economic importance, the adverse consequences of any form of poor governance on the entire economy would be severe. In a word, the smoke from the oil house is alarming . It is not good omen or healthy development for an economy just recovering from recession. As already observed, the NNPC is a special haven because of its official hold on oil wealth in Nigeria. Thus we tend to shiver any time some thing sinister happens there.
The allegations against Dr Baru are weighty and capable of stalling good governance of the company. Should they be true and without due disciplinary action or appropriate intervention, then the wrong signals would be sent across that ours is a country where all acts of impunity are tolerated. It will make nonsense of the anti- graft war. For instance, the Minister complained of lack of consultation with the Board on appointments, and award of contracts even above $20m by the NNPC and denial of access to Mr President by some gate- keepers. As he puts it :”Despite being Minister and Chairman NNPC Board” there has been no due consultation with him or the Board by the GMD on matters of appointment, and award of contracts.
This is awkward- if true. According to experts, communication is the life wire of any organisation. Where communication is poor or withheld the organisation suffers immensely. The Minister’s letter conveyed a wide communication gap between the management of NNPC and its Governing Board or better still, between the Minister and GMD. It is needless to recall here that the GMD did staff posting much earlier before the Minister’s leaked letter which was heavily criticized by the public for its alleged lopsidedness. The Minister said he learnt of the staff postings from media reports. According to him, he was not privy to appointments, “reorganizations and reposting done since Dr Baru resumed as GMD.
If this looks strange and unwise, the letter further revealed that there was also “no consultation with Board Service Committee, whose function it was “to review potential appointments and terminations of senior staff prior to implementation”. ‘Members of the Board learned of these appointments from the pages of social media and press releases of the NNPC’. Similarly, the NNPC Board was excluded from contract award matters. Consequently, “no contract has been run through the Board since over a year of Dr Baru’s tenure”. Yet “the legal and procedural requirements are that all contracts above $20m would need to be reviewed and approved by the Board of NNPC”. These are gross indications of violation of due process or disregard for rules of the game which is the stuff poor corporate governance is made of.
Other issues were raised such as the non attendance of meeting called by the Minister. In short as the Minister let the world to know there are ” many occurrences of disrespectful experiences …encountered with the GMD as your Minister of State. The working relationship with him has been fraught with humiliation, sidelining and campaigns of character defamation against me”, blatant insubordination, disrespectful attitude etc. The picture that one gets here is that of an organisation in turmoil drifting steadily to its downfall as a result of poor culture of poor governance fueled by avoidable communication difficulties.
Nor can we pretend that that there is really nothing serious or unusual happening at the oil house. The unrepentant and non- reconcilable response of the NNPC to the Minister’s allegations confirms the crisis. It did not only confirm the uneasiness at the House of oil in Abuja, also it suggests that too that the crisis was not abating soon. This is a frightening prospect for us all. What is more, the NNPC’s reply to the allegations did not deny the charge of violation of due process, of disregarding the role of Board in appointment, or of the GMD’s refusal to attend meetings with the Minister but that Dr Baru merely followed the path of the company set since the days of Kachikwu as GMD. In other words, what the company did was in consonance with the tradition laid by Dr Kachikwu as GMD -even if they were wrong.
Though not a satisfactory or convincing answer, yet the NNPC’s reply made an important revelation to the effect that the Minister lied because he in fact nominated some contractors for some jobs the company did in the past. In short, the Minister was not only aware of some contracts awarded, also he recommended some of the contractors who got the contracts. However, the response failed to say whether the nomination was done at personal level as Minister or at official level as Chairman NNPC Board and /or whether it got the approval of the Board eventually.
This is important because as the Minister noted the ‘ the NNPC Tenders Board (NTB) – a collection of top level NNPC executives and COOs withe GMD as the Chairman cannot be the final clearance authority for multi -million dollar contracts it enters into.. But there is the moral twist to it here: If the nomination was done by the Minister without the Board’s knowledge, then the Chairman can be seen as wrongly proclaiming himself as the Board or reducing the latter to a mere rubber stamp entity. .He in fact spoke of his readiness to give ‘anticipatory approval’ on behalf of the Board in his letter to Mr President.For sure, he is not the Board but only member/ Chairman of the Board NNPC.
There is the need to correct the wrong impression about the role of Board. Many observers including the NNPC management’s response tend to see the Board as playing little or no role in the affairs of the NNPC. To them, the GMD was only responsible to the Minister of Petroleum of Resources who today is Mr President and not to a Minister of State, who according to them is a “junior Minister” or Deputy Minister.
While many of Dr Baru’s supporters held this opinion, it is however unfortunate for many reasons : It is a deliberate wrong interpretation of public service rules of Nigeria to justify obvious mis-use and a mischievous move against the intention and spirits of establishing Boards. It betrays a poor understanding and knowledge of bureaucracy, the proper role of the Board and what good corporate governance is all about. It is a vain – use of Mr president’s name to defeat due process of engagement. It must therefore be resisted at all cost in the national interest.
For the avoidance of doubt, parastatals are responsible to the Minister through their Boards. However, where there is no Board the Ministry assumes the functions of the Board in which case the heads of parastatal can deal directly with the Minister, who now combines the work of the Board with his/ hers. The attempt to obscure things by bringing in Mr President to crisis should be seen as a cunning or dishonest way to sideline the Board.
In other words, since the NNPC Board has been set up with a Chairman by Mr President, the GMD’s direct link with the Minister ceases. He must operate through the Board to him. In the view of experts the main task of Board of directors is to facilitate effective and prudent use of resources, ensure accounting, administrative and management rule are well observed in order to allow for “the long term success of the organisation.
There is the all abiding need to resolve the personal conflict between the Minister and GMD. The Cold War and a frozen relationship if left unchecked could could lead to the crash of the NNPC with serious adverse consequences for the entire country. From the firework on display, it is clear that the inter- personal relationship between the two top- most guys at the Oil House was at its ebb or zero point.
This was bound to create disharmony, fear and disorientation as well as different camps and loyalties . The enemy camp syndrome was already at work and it was bound to affect performance adversely. It is certainly not a good development for the organisation and the oil industry in Nigeria. In short, while the cause of the crisis can be reduced to a personality clash of grave magnitude over old feuds, it is wise to intervene to check the ensuing fire from growing bigger and causing more havoc. Now that the nerves are calming and there is fuel shortage once more at the gas filling stations across the country, it might be helpful to revisit that rift between Dr Kachikwu and Dr Baru with a view to removing avoidable obstacles to good corporate governance at the House of Oil.
Dr. John Abhuere FNIM, is Director for Centre for Child Care and Youth Development , Abuja