US embassy cable - 03LAGOS2287

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 002287 
 
SIPDIS 
 
 
E.O. 12958: DECL: 11/04/2013 
TAGS: EPET, PGOV, PINR, PREL, EINV, NI 
SUBJECT: PRESIDENT SHUFFLES THE DECK WITH NEW OIL ADVISOR 
AND NIGERIAN OIL CORP CHIEF 
 
Classified By: J GREGOIRE FOR REASONS 1.5(B) AND (D) 
 
 
1. (U) SUMMARY. On Monday, November 3, the GON announced the 
removal of Jackson Gaius-Obaseki as the Group Managing 
Director (GMD) of the Nigerian National Petroleum Corporation 
(NNPC). Funsho Kupolokun, former Special Assistant to the 
President on Petroleum Matters, was appointed new GMD, 
effective immediately. The GON also announced Edmund Daukoru 
would replace Dr. Rilwanu Lukman as the Special Advisor to 
the President on Petroleum and Energy. Jafaru Paki will be 
the new Special Assistant to the President on Petroleum 
Matters.  END SUMMARY. 
 
 
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OUT WITH THE OLD 
---------------- 
 
 
2. (C) Jackson Gaius-Obaseki was unceremoniously replaced as 
head of NNPC by means of a terse statement read by the 
Secretary to the Government of the Federation.  Obaseki had a 
 
SIPDIS 
tumultuous tenure as NNPC chief.  His removal had been 
speculated since August 2003, when almost the entire top 
management of the NNPC was sacked. Obaseki had frequent 
run-ins with both the National Assembly and the Revenue 
Mobilization, Allocation and Fiscal Commission (RMAFC). 
Obaseki was also never close to Presidential Adviser and 
former OPEC Secretary General Rilwanu Lukman, but seemed to 
ensure his political survival, until this week, by reporting 
directly to the President. 
 
 
3. (C) The President may have had enough of Obaseki over the 
issue of fuel deregulation.  The overall mood in Nigeria has 
been tense for the last month as organized labor threatened 
to engage on a nationwide strike to protest rising fuel costs 
as a result of the sudden Presidential announcement on 
October 1 that Nigeria's downstream sector would be 
deregulated immediately.  President Obasanjo wanted complete 
deregulation of the downstream sector to take effect 
immediately, whereas Obaseki supported staggered deregulation 
to lessen its impact. 
 
 
4. (U) Deregulation has been a flash point for union and 
public ire also because of the sorry state of the nation's 
four oil refineries.  During Obaseki's watch (1999-2003), 
repair and maintenance contracts worth hundreds of millions 
of dollars were paid out, yet the refineries rarely achieved 
a production level above 40 percent of capacity. Throughout 
the last year, all four refineries were offline on several 
occasions for weeks at a time.  As a result, this oil 
exporting country has had to import up to 100 percent of its 
fuel consumption needs.  While Obasanjo claims the 
elimination of subsidized NNPC crude oil and fuel purchases 
will save the country two billion dollars per year, union and 
civil society advocates point to the ongoing maintenance and 
repair work at the refineries (to no apparent end) as proof 
of systemic corruption in NNPC, which, they argue, will not 
be addressed by deregulation. 
 
 
No Stranger to Controversy 
 
 
5. (U) Obaseki frequently was called before the National 
Assembly to face charges of misappropriation of oil revenues. 
The RMAFC also investigated the NNPC concerning the operation 
of special accounts for the proceeds of crude oil sales 
(constitutional provisions require revenues to be paid into 
the Federation Account, which is shared by the federal, state 
and local governments). 
 
 
6. (U) Obaseki recently came under fire for admitting in a 
news daily that the NNPC had paid some 224 million naira 
($1.7 million US) for hotel suites he used at the Abuja Nicon 
Hilton over the last four years.  He fueled the fire by 
claiming that this was a sacrifice on his part; he said he 
was forced to stay at the Hilton because the amount allocated 
for his accommodations was inadequate to build a home 
suitable for his position and stature.  He also admitted in a 
recent interview that over 1,000 petitions had been written 
against him during his tenure as GMD of NNPC, and it is only 
by divine intervention that he was able to keep his job. 
 
 
Limited Options 
 
 
7. (C) While there is much wrong at NNPC, and even if he had 
had the best of intentions, Obaseki was limited in his 
professional and political options given the fact that 
President Obasanjo kept Lukman close as Special Advisor, and 
Obaseki was not a member of the cabinet.  Obaseki did manage 
a reorganization of NNPC, and at least in the first three 
years of Obasanjo's presidency, fuel queues, long the bane of 
Nigerian commerce and consumers, had virtually disappeared. 
 
 
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IN WITH THE NEW 
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8. (C) The new NNPC head, Funsho Kupolokun, is a former group 
executive director of NNPC, and an advocate of fuel 
deregulation. He is known to lecture audiences on the 
benefits of deregulation using a laptop PC and projector. He 
has maintained a good relationship with Obasanjo during his 
time as Special Assistant to the President on Petroleum 
Matters, and is an alumnus of the President's high school, 
Baptist Boys High in Abeokuta (the president is reputed to be 
kind to the boys of his school).  Kupolokun hails from Ondo 
state in the South South region. 
9. (C) Alhaji Jafaru Aliyu Paki assumes Kupolukun's role as 
Special Assistant to the President on Petroleum Matters. 
Paki has a long career in the petroleum industry, beginning 
with Mobil Nigeria.  He worked for NNPC at both the Warri and 
Kaduna refineries, and at the Pipelines and Products 
Marketing Company (PPMC), before being seconded to Unipetrol 
in the 1980s where he served as Executive Director for 
Marketing.  He retired when Unipetrol was privatized.  Paki 
is from Kaduna, and is reportedly close to Vice President 
Atiku. (NOTE:  According to a Shell executive, Jafaru shares 
the Vice President's aversion to transparency and his 
inclination to dip into the till.) 
 
 
10. (C) The GON also announced on November 3rd that Dr. 
Edmund Daukoru has assumed the position as Special Advisor to 
the President on Petroleum Matters, from which Lukman 
resigned effective November 1.  An Ijaw from Bayelsa state, 
Daukoru was a manager with Shell Oil during the 1970s and 
early '80s, and was NNPC managing director under President 
Ibrahim Babingida.  A Shell manager reports that Daukoru is a 
director of Platform Oil, an indigenous company that recently 
won a license in Nigeria's marginal fields offering.  News 
reports are calling Daukoru a reform-minded technocrat.  He 
too is considered a strong advocate for downstream 
deregulation, but also said in a recent interview that better 
communication of government policy is needed to win popular 
support. 
 
 
11. (C) COMMENT: Even with NNPC's chronic problems, Obaseki 
was at least an approachable figure for both the Mission and 
corporate leaders.  We will report septel on the view from 
within NNPC and the oil business community regarding these 
personnel changes, and what message President Obasanjo may be 
sending by this shuffling.  END COMMENT. 
HINSON-JONES