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Sanusi Says NNPC Retaining $10.8 Billion Fuels Nigeria Risk

Nigeria’s Central Bank Governor Lamido Sanusi
Nigeria’s central bank Governor Lamido Sanusi said, “No one has the right to retain money that should have gone to the federation account, so the fact that you’ve admitted retaining, or withholding $10 billion is itself bad enough.” Photographer: Chris Ratcliffe/Bloomberg

Nigeria’s central bank Governor Lamido Sanusi said the state oil company had no right to retain $10.8 billion in income, which has contributed to a drop in savings that’s left the nation exposed to possible price shocks.

“Given where the oil price is, we should have more in terms of reserves and savings, and because we don’t have that we are susceptible to shocks in the event of a decline in the oil price,” Sanusi, 52, said in a Jan. 15 interview at the central bank’s headquarters in the capital, Abuja.

A letter Sanusi wrote to President Goodluck Jonathan alleging the Nigerian National Petroleum Corp. had withheld $49.8 billion in revenue sparked a public outcry when it was leaked to local newspapers last month. Finance Minister Ngozi Okonjo-Iweala told reporters on Dec. 18 a reconciliation of the accounts showed unaccounted oil receipts stood at $10.8 billion.

“No one has the right to retain money that should have gone to the federation account, so the fact that you’ve admitted retaining, or withholding $10 billion is itself bad enough,” said Sanusi. “This money was supposed to come in and if it came in, it would be part of our reserves and part of our excess crude savings.”

Bernard Otti, the NNPC’s group executive director of finance and accounts, said on Jan. 10 the $10.8 billion was spent on pipeline repairs, fuel subsidies, crude losses and reserve fuel.

Naira Peg

The lack of accounting in oil revenues has increased pressure on Jonathan as he faces defections from the ruling Peoples Democratic Party and former President Olusegun Obasanjo criticized him for failing to tackle corruption. Lagos-based ThisDay newspaper reported on Jan. 9 that Jonathan told Sanusi to resign because he allegedly leaked his letter about the NNPC to Obasanjo.

Sanusi, who doesn’t plan to renew his contract as governor when it expires in June, said there is no request from Jonathan to resign and “it’s back to business as usual.”

Nigeria’s gross reserves have fallen 11 percent from last years peak of $48.85 billion in May. The excess crude account, which holds the savings the nation makes when the crude price is above the benchmark price estimated in the budget, dropped to under $5 billion from $9 billion at the beginning of the year, Okonjo-Iweala said in October.

The central bank supports the naira by selling foreign currency from its reserves at twice-weekly auctions to keep the local unit within a range of 3 percent around 155 per dollar. The naira was trading on the interbank market at 159.80 against the U.S. currency as of 3:30 p.m. in Lagos today.

Savings ‘Leakage’

Lower savings are “not explained by a huge increase in government spending, because there wasn’t between 2013 and 2012,” Sanusi said. “So if spending didn’t increase much and if the oil price didn’t crash much and exports didn’t crash much, there’s a leakage.”

A decline in oil production doesn’t explain the draw down in savings either because the crude price has exceeded the government’s budgeted price, Sanusi said. The spot price of Nigeria’s benchmark Qua Iboe crude has exceeded $100 a barrel for most of 2013, above the $79 budgeted price that year.

“This whole process for me is one in which we need to force greater transparency over oil revenues,” Sanusi said. The NNPC has “now given explanations and they’re going to be called to show evidence.”

Sanusi said his letter to Jonathan was never meant to be made public.

Election Threat

“What was in fact an invitation to investigate somehow became read as the end of an investigation, the conclusion from an investigation and that wasn’t it,” he said. “This was an initial report given that, for me, raises sufficient concern to ask the president to have an investigation so we can know exactly where the money is.”

Jonathan’s PDP, which has been in power since military rule ended in 1999, may face its sternest electoral challenge next year. That’s adding to risks that government spending may increase and inflation will accelerate from 8 percent in December. Expenditure climbed 17 percent before the 2011 presidential vote.

The Finance Ministry will probably be able to keep spending under control in the run up to the vote, Sanusi said.

“I have had a number of discussions with the finance minister and I get a sense she is very, very committed to keeping a tight leash on spending especially as we come towards elections,” he said.

No Diplomacy

Jonathan hasn’t given any indication yet of who will be the next governor. Lagos-based Vetiva Capital Management Ltd. said in an Oct. 28 report that potential candidates include Sanusi’s four deputies and Aigboje Aig-Imoukhuede, chief executive officer of Access Bank Plc. Sanusi declined to comment on who he thought would be the best candidate.

Drawing criticism from members of parliament opposed to his push for spending curbs on salaries, Sanusi fought off plans by lawmakers in 2012 to amend rules that would curtail the governor’s powers over the central bank.

“I could have annoyed these guys a little bit less if I was a bit more politically sensitive and more tactful,” he said. “Some people have strong diplomatic skills and can make the same point without annoying people. My father was a career diplomat, so he took all diplomacy in my blood, I have nothing left.”

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