Blight Expectations As New NNPC Takes Off
Today July 1, the Nigerian National Petroleum Corporation (NNPC) officially transformed from a state-owned oil corporation to a private limited liability company with high expectations to see a total overhaul of the country’s oil and gas sector.
To be called the Nigerian National Petroleum Corporation Limited (NNPC Ltd), the new entity will be governed by an extant company and allied matters (CAMA) regulation.
For so long, the old NNPC was frosted with bureaucratic inefficiencies and administrative bottlenecks which had left many stakeholders bordering on the well-being of the country’s oil sector.
The transformation had resulted from the passage of the Petroleum Industry Act (PIA) in August 2021 when the old NNPC was unbundled and a new NNPC Ltd emerged with the hope to improve the Nigerian oil sector.
With the NNPC going to become a private company, it then means its accounting would change and be in line with the International Financial Reporting Standard, a public affairs commentator, Bala Zakka, had told our correspondent.
The transformation is also expected to make the new entity have what he called a profit-centre and a cost-centre, thereby making it a profit maximisation and cost minimisation enterprise.
“Any company that is just after profit maximisation, and cost minimisation do not care what happens to the consumers but their profit. This is why at every point in time, institutions of government need to be alert and awake to cushion the pain,” Zakka said.
While a lot of analysts make the mistake of trying to compare the model of the Nigerian Liquefied Natural Gas (NLNG) with what NNPC has done, Zakka pointed out that the two are completely different models that do not even have a meeting point.
The NLNG is a consortium of oil companies that came together and had a relationship with NNPC, he explained.
“This is how to understand private companies of international repute,” he said. “In the case of Nigeria, you cannot have a wholly-owned company or corporation and begin to behave as if you are a private company. It is wrong! Every country you go to has one way or the other of helping its citizens. We will just wait and see.”
He added that the government by its definition was supposed to provide goods and services for its citizens, but if in the case of Nigeria, the government wants to run everything about its institutions like capitalist nations, only time will tell.
A look at the key metrics of the former NNPC’s financial report showed that the corporation posted a profit after tax (PAT) of N287.23 billion, a revenue of 19.75 per cent or N915.31 billion to N3.72 trillion in 2020 respectively and a trading loss of N1.7 billion in 2019. This is according to its Audited Financial Statements for the year ended December 31, 2020.
A further breakdown of the report showed that revenue from crude oil sales declined by 23.24 per cent or N250.69 billion to N828.13 billion, revenue from petroleum product sales fell by 22.06 per cent or N644.38 billion to N2.28 trillion, revenue from services declined by 37.82 per cent or N54.72 billion to N89.96 billion, and revenue from sales of natural gas appreciated by 7.04 per cent or N34.49 billion to N524.4 billion.
The revenue from crude oil sales at the corporation related to evacuated crude from the refineries sold directly to marketers during the year, petroleum products sales including the sale of Premium Motor Spirit, Dual Purpose Kerosene, Automotive Gasoline Oil, lubricants and other related products.
Last week, fuel scarcity surfaced across the major cities of Nigeria when the NNPC failed to supply adequate products to end-users, according to the Independent Petroleum Marketers Association of Nigeria (IPMAN). While the scarcity seems to have abated, the majority of filling stations across the country are still seen selling above the official pump price of N165 to as high as N180 thereby extorting the end-users.
Joe Nwakwue, a policy analyst and immediate past Chairman, of the Society of Petroleum Engineers Nigeria Council, was of the view that there was more to gain in the PIA than regret.
He had told our correspondent that the PIA provides an opportunity to reset the oil industry for growth and value addition.
However, according to Nwakwue, clearing up the mess in the Nigerian oil and gas industry takes a while.
“It will take some time because there are some challenges, but this is a good opportunity to develop an oil and gas industry,” he said.
The Group Managing Director (GMD) of NNPC Ltd, Mele Kyari, had reportedly said that the transformation signified a new beginning for the entity.
According to him, the company will do all things possible to guarantee compliance with the requirements of the PIA in terms of guidelines and timetables for action.
Kyari hinted that the new business would be active when the Ministers of Petroleum and Finance transfer verified assets from the corporation to the NNPC Ltd, adding that the earliest time the corporation could begin to issue its Initial Public Offer (IPO) to investors would be in the next two years.
Reacting to making the new NPPC a quoted company, the National Coordinator of the Progressive Shareholders Association, Boniface Okezie, queried the remains in NNPC that would make for attractive to investors when the company’s shares are eventually listed on the Nigerian Exchange Limited (NGX).
He said, “After many years of wastage by the management since it came to being, I think we missed the opportunity to have not brought the NNPC to be made a publicly quoted company over these years. If we had done this, the wastage of subsidy would not have been in trillions. Nigerians would not have found themselves in the mess we see ourselves now. It is later than never!”
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