Government explains crude oil deal
Malawi Government says the crude oil from Nigeria was not a donation from the Nigerian government, but a result of a 12-month business deal between Nigerian National Petroleum Corporation and the Malawi Government.
The Office of the President and Cabinet (OPC) revealed this in its response to a Consumers Association of Malawi (Cama) query on how proceeds from the crude oil Malawi received from Nigeria were used.
OPC spokesperson Arthur Chipenda’s letter dated March 14 2014, says the issue of crude oil was not covered in the memorandum of understanding (MoU) signed by President Joyce Banda and her Nigerian counterpart Goodluck Jonathan in September 2012.
Chipenda said the agreement, which Banda signed with the Nigerian National Petroleum Corporation in May 2012, was to buy 30 000 barrels of crude oil per month at a cost of $120 million (about K54 billion).
“One shipload at the time was estimated to cost around $120 million.
As you may have noted, the crude oil transaction was not a donation from the Federal Republic of Nigeria to the Government of Malawi.
“This was a straightforward government-to-government commercial transaction for which Malawi had to find foreign currency to pay for the crude oil supplied,” Chipenda said.
He, however, said due to the scarcity of forex, government was unable to fulfil the agreement; hence, a decision was made to engage National Oil Company of Malawi (Nocma) to shoulder the obligation and remit royalties to government.
Added Chipenda: “From the sale agreement spanning from May 1 2012 to April 30 2013, royalties amounting to $1 256 081.70 has been earned and transferred into Nocma’s foreign currency denominated account for crude [FCDA] maintained at National Bank of Malawi. Government, through the Ministry of Finance, asked Nocma to transfer some of the proceeds to a government account maintained at the Reserve Bank of Malawi.”
“The balance of approximately $417 681.70 which includes an element of interest earned from the bank is left in Nocma’s account with the National Bank. As you can see, the issue of a donation does not arise from the crude oil deal Malawi Government struck with its counterpart, the Federal Republic of Nigeria,” he says.
However, Cama executive director John Kapito said in an interview on Monday that the response from OPC has many unanswered questions because it had focused on the donation, leaving out substantive issues.
Kapito said the response does not say how Nocma was chosen to receive government finances instead of the Reserve Bank of Malawi and also a full detail of how many barrels and shiploads came to Malawi.
Said Kapito: “We must emphasise that we are extremely concerned on how the whole crude oil arrangement was conceived and implemented. The failure by government to consult the key government institutions such as Parliament leaves a lot of questions unanswered.”
“Our understanding is that this was an arrangement between Malawian and Nigerian governments, but it seems the whole process was personalised including the appointment of the oil broker. Government needs to make available the MoU that was signed by the two countries,” he said.
