Two months ago, the president appointed Ibe Kachikwu, the group managing director of the Nigerian National Petroleum Corporation (NNPC). In a departure from convention, Kachikwu is neither an engineer nor a geoscientist. He is a lawyer, albeit with a long and distinguished career in the petroleum industry (as well as an excellent academic background). His immediate past role was as executive vice chairman and general counsel of ExxonMobil, the super oil major.
By appointing a head whose core competence is regulatory compliance and corporate governance, the president’s priority for the NNPC is obvious – the corporation’s administration has to be cleaned up. Over the years and perhaps peaking during Jonathan’s regime, the NNPC had come to epitomise licentiousness in Nigeria’s public administration. Dismantling an embedded culture of malefaction will not be simply about replacing people in key positions. It will be about systemic change that endures beyond the immediate but ultimately transient charismatic authority of Kachikwu and the president that appointed him.
The challenge is to transform, for good, the institutions – in the sense of mores, norms and values – that constitute the NNPC. The corporation must be brought sustainably in compliance with not just the law but also the spirit of it; the NNPC must become transparent and be run according to good governance principles.
To institutionalise rule adherence and due process at the NNPC, Kachikwu needs no new laws or regulations and certainly not the vaunted but perhaps overambitious Petroleum Industry Bill. Sometimes, less is more and the NNPC Act, in its comparative brevity, already provides enough instruments and a dynamic framework for Kachikwu to work with.
The second provision of the NNPC Act, right after the sentence that establishes the corporation as a ‘body corporate with perpetual succession and common seal’, is that the affairs of the NNPC shall be conducted by a board of directors. The Act makes the minister of petroleum the chairman of the board. The other members are the NNPC managing director, the director-general of the Federal Ministry of Finance and three persons who are so sufficiently knowledgeable of the oil business or have professional attainments that make them capable of useful contributions.
The NNPC clearly needs a board if it is to be managed in accordance with the law. Beyond mere rule compliance, however, an effective board is the crucible of corporate governance.
The NNPC Act does not elaborate the board’s functions other than to conduct the corporation’s affairs. International best practice in corporate governance thankfully provides useful parameters. The role of a board in a body corporate is typically to set policy while executive management implements that policy. The NNPC Act toes the line by stating that the managing director shall be ‘responsible for the execution of policy of the corporation and day-to-day running of [its] activities and associated services’.
Accountability is a keyword in the perquisites of good corporate governance. The essence of separating powers between the board and executive management is to ensure a system of checks and balances. It is inimical to good corporate governance and accountability that either the board or the executive management should have unfettered powers of decision-making for the entire group. Given their respective roles, the effective board must ensure that management is held to account financially and operationally.
Financial accounting has been the bane of the NNPC as borne out in the PwC report released in the waning days of the Jonathan government. The NNPC Act provides for the corporation to keep proper accounts and records ‘in a form which shall conform with [sic] best commercial standards’. The corporation’s accounts are required to be audited at the ended of every financial year by auditors appointed in accordance with the guidelines laid down by the auditor-general of the federation.
The hullabaloo about the audit procedures that PwC performed on the NNPC should not have arisen if the subsisting statutory provision on accounting, again a hallmark of corporate governance, were diligently complied with. It will be the board’s responsibility to ensure proper accounting and record-keeping. The board will also ensure that the NNPC prepares and tenders a budget at least three months before the beginning of each financial year as the Act mandates.
Clearly, the board that the NNPC requires is not the pliant and nominal ‘board of trustees’, an organ that by definition is more suited to a charity or NGO, which it has been laden with in the recent past. The NNPC needs an active and involved corporate board which effectively sets the all-important tone at the top as envisaged by the NNPC Act.
Appropriately too, in keeping with international best practice, the desired board is not to be composed of the group executive ‘directors’ (GEDs). The GEDs are really operational heads reporting to the group managing director. The board is instead an oversight body, operating over and above the managing director (who is a nonetheless a principal member), so that it is able to subject the entire management (including the GEDs) to scrutiny and account.
That which is good at the top of the corporation will also be good for the myriad subsidiaries of the NNPC. Many of those subsidiaries are incorporated under the Companies and Allied Matters Act. Availing them of the requisite legal provisions and best practice corporate governance in the constitution and operation of their boards will be similarly recommended.
It is not the NNPC managing director’s responsibility to set up the board except perhaps (as is now likely) Kachikwu becomes minister of petroleum as well. Whatever the case, as the governance professional to whom the president has entrusted the cleanup of the NNPC, he will not be exceeding his bounds to whisper the needful to the president. The existence of a board of course provides him with the requisite cover of collegiate decision-making – ‘it was the board’s decision’ – for making the wrenching changes that the NNPC needs. We wish Kachikwu Godspeed in this most pressing of national assignments.
Peter Ntephe & Steve Ahaneku
