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Minister of State for Finance, Aderemi Babalola, may not have goofed after all when he declared that the Nigerian Nigeria National Petroleum Corporation (NNPC) was bankrupt, as its management admitted before the Senate Committees on Petroleum Upstream and Downstream yesterday that the corporation was actually insolvent.

Group Managing Director, Mr. Augustine Oniwon, said the corporation indeed wrote the Federation Accounts Allocation Committee (FAAC), of which the Minister of State is the Chairman, admitting a situation of insolvency because it could not honour its N450 billion debt repayment obligation to the Federal Government.

He then submitted the letter written to the FAAC in which corporation stated that it was insolvent.

Justifying its position, the NNPC boss, who appeared before the two committees along with Mr. Babalola gave details of how past Nigerian leaders indiscriminately demanded money from the corporation without recourse to due process.

Oniwon, who appeared along with Babalola to explain the controversy triggered by the disclosure by the minister and the counter-claim by government, said the corporation had written the FAAC that due to cash flow issues, it would not be able to pay the N450 billion it was owing the Federation Account.

In the said letter, written to Babalola, a copy of which was submitted to Committee Chairman, Senator Lee Maeba, the GMD had said 'NNPC is facing financial difficulties evidenced by among others, the inability to pay for the domestic crude as at when due and delays in settling bills for fuel imports.

'The financial difficulties essentially stem from disequilibrium between the costs and cash inflow streams; NNPC is insolvent as current liabilities exceeded current assets by N754 billion as of December 31, 2008. NNPC is incapable of repaying N450 billion owed to the Federation Account unless it is reimbursed the N1. 156 trillion requested from the Federal Ministry of Finance.'

However, Oniwon told the Senate Committees' members that although NNPC was in a position to pay the debt, it refused to do so because of the N1.156 trillion that the Federal Government which owned 52 per cent of the Federation Acccount was owing to it as a result of directives from former leaders asking the NNPC to release funds for various uses without recourse to the National Assembly over the years. That, he said, amounted to the N1.156 trillion, which the corporation was demanding from the Federal Government.

Pressed to explain how former leaders demanded money from the corporation and for which purpose, he gave an instance of how a former president directed the NNPC to release N651 million for the take-off of the Department of Petroleum Resources (DPR), but which had never been refunded.

Again, Oniwon told the bewildered lawmakers, how a president (not named) asked them to release another $18 million, when a sugar company was to be established which also had never been refunded to date.

The Senators expressed shock at the penchant of the Executive to request the NNPC to release funds without recourse to due process. They then ordered the corporation to present its annual accounts since 1999.

While expressing surprise that NNPC budget was approved only by the Board of Directors, the Committee members also requested the Group Managing Director to return to the National Assembly today with copies of the law authorising such approval.

Babalola had earlier told the committees that when the NNPC first deducted funds from Federation Account, N85 billion was involved but the promise was that it would be paid the following month.

'Rather than the corporation refunding the following month, more was withheld but at that time, we all believed that the cash flow problems would only last for a short time,' he explained.

The Minister, however, denied knowlege of the Federal Government owing NNPC the N1.156 trillion as, according to him, the Federal Ministry of Finance had always released funds for payment of petroleum subsidy.

Meanwhile, a statement yesterday by the NNPC, said the Senate committees confirmed that the corporation was not insolvent.According to the statement, the Joint Committee chaired by Senator Maeba rose from a hearing on Tuesday 'concluding 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.

'Senator Maeba explained that after hearing from both the Minister of State for Finance, Mr Remi Babalola, and the Group Managing Director of the NNPC, Engr. Oniwon, on the matter, it was clear that the audited accounts of the NNPC relied upon for the insinuation of insolvency was that of 2008 which Oniwon said was the 'most trying year for the corporation due to the increased activities of militants in the Niger Delta which reduced production from over two million barrels per day to less than one million barrels per day. Oniwon was also quick to add that as challenging as 2008 was for the industry,it never brought the corporation anywhere near insolvency.'

'Senator Maeba said from the explanations given by both parties and the evidence laid before the committee, it was clear that the attention should have been focused on the date (31st December, 2008) as reflected in the statement credited to Babalola, rather than the emphasis on the word 'insolvent', which created the negative impression about the current state of finances of the NNPC.'Babalola, in his submission explained that as a chartered accountant and Minister of the Federal Republic, he understood the implication of declaring NNPC insolvent knowing that the Corporation as a vital agency of the Federal Government enjoys the sovereign backing of the Federal Government and therefore can never be said to be insolvent.

'Oniwon on his part said NNPC as of today is very solvent as daily production has gone up as a result of the amnesty programme of the Federal Government which has stemmed militants' activities.

'He said NNPC is a going concern that is meeting its financial obligations to stakeholders both locally and internationally.'