Kapito queries Malawi govt on Nigeria oil deal: US$1m earned

Malawi government has been forced to come out in open and disclose the country earned US$1,256.081.70 as royalties from crude oil deal it signed with Nigerian government in May 2012 with large part of the money already used.

Government’s openness on the crude oil deal it signed with State-owned Nigerian National Petroleum Corporation (NNPC) on May 16 2012 followed pressure from the country’s consumers’ rights watch-dog, Consumers Association of Malawi (Cama).

Cama’s Executive Director, John Kapito in an interview with Nyasa Times bemoaned government’s reluctant to disclose to the nation how much money was generated from the contract although it was done publicly.

Kapito:  Why cloak o secrecy

Kapito: Why cloak o secrecy

“The controversy and information surrounding how the Crude oil resources were remitted and used remain a top secret for reasons better known to Government and yet the whole Nigerian Crude oil deal was done publicly and one wonders why such a public arrangement and agreement would become so guarded by secrecy,” argued Kapito.

But in reaction, Office of the President and Cabinet (OPC) revealed Malawi earned US$1,256.081.70 royalties from the sale agreement spanned from May 1st, 2012 to April 30th, 2013.

In a written response signed by Arthur Chipenda, on behalf of Chief Secretary to the Government, copied to Chairperson for Malawi Human Rights Commission (MHRC), government disclosed it has already used part of the money.

Chipenda disclosed that the money, earned in form of royalties, was transferred into National Oil Company of Malawi (Nocma) Foreign Currency Dominated account for crude (Afcda) maintained at National Bank of Malawi.

“Government through Ministry of Finance, asked Nocma to transfer some of the proceeds to a government account maintained at Reserve Bank of Malawi. The balance of approximately UD$417,681.70 which include an element of interest earned from the bank is left in Nocma’s account with the National Bank,” explained Chipenda.

Chipenda without disclosing how much barrels Malawi sold during the period of the deal, disclosed that government was forced to contract Nocma to service the deal as an agent since it was unable to secure US$120 million required to purchase the crude oil.

Under the government-to-government deal, Nigeria agreed to supply Malawi with crude oil through the NNPC and allowed Malawi to either process or sell the crude, thus-as a buyer-after paying upfront $2.5 million (then over K1 billion) before making first uplift of the oil.

The contract gave Malawi approval to buy and sell 30 000 barrels per day of crude oil made up of several grades as specified in the lifting schedule for each month. This means that, effectively, the country was at liberty to buy and sell over half a million barrels a month. “Having signed the crude oil sale and purchase contract, Malawi had to secure foreign currency with which to buy crude. Unfortunately, Malawi was not able to secure USD 120 million required to purchase the crude oil due to unavailability of foreign exchange at that time.

“The opportunity that was available was to find an agent to service the contract and Malawi to benefit from royalties. The National Oil Company of Malawi (Nocma) was asked to handle the transaction based on the royalties arrangement,” said Chipenda.

But Kapito has doubted the whole transaction, querying as to who authorised the generated royalties to be deposited in Nocma’s account.

“Let us not forget that Nocma borrowed heavily from PTA bank and Malawi Energy Regulatory Authority (Mera). Why should Nocma hold such funds in its account when it has huge debt and who decided that the funds must go into that account, was it Parliament or the executive?” Kapito queried.

The crude oil deal was signed by President Banda who pushed for the contract, first initiated by her predecessor late Bingu wa Mutharika in his attempts to solve chronic fuel shortages.

Media reports last year revealed that Banda’s administration had dragged the country into a crude oil contract that could be costly for the already troubled economy due to lack of a clear cost-benefit analysis for Malawi in the deal and the legal pitfalls.

It is reported President Banda tasked Nigerian business mogul, Michael Anyiam-Osigwe, as Honorary Consul-General, to ensure that Malawi got the allocation to purchase and sell crude oil from Africa’s largest oil producer whose proceeds, according to Nocma, general manager Robert Mdeza, would be used to import processed fuel suitable for Malawi.

In November 2012, Petroleos De Geneve SA Limited (PDG) managing director Raymond Anyiam-Osigwe told Malawi’s daily that Lilongwe was getting US0.4 cents in royalties per barrel, which he said totalled $760 000 (over K300 million) by then.

He said Malawi had uplifted 903 691 barrels in August 2012 and 997 416 in the second phase in October last year, which is nearly two million barrels.

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