By ADEBAYO OBAJEMU
To say that the future of the Nigerian National Petroleum Corporation, NNPC is on the block would be an understatement.
Given the shifting fortunes in the sector, it is clear that the corporation is saddled with the challenge of adapting to the ongoing currents as they affect the sector and the national economy.
Long acknowledged as the single most important cash cow in the land, the NNPC today is finding that it has to reform or be reformed.
While it has for long been used to calling the shots, it is now under immense pressure to explain itself. In the past few weeks, its top brass has been dragged to the National Assembly to provide explanations on the operations of the corporation.
In one such appearance, the focus of inquiries was the drilling cost of crude with the corporation having to explain why its figures were above the global equivalent.
There have also been questions about the profitability of the corporation. Within the outgoing week, presumed audit documents were leaked to the public indicating that at least one of the refineries ostensibly being managed by the corporation, the Kaduna Refinery and Petrochemical Complex, KRPC may have expended as much as N65billion while at the same time posting zero revenues!
Within the same vortex, the corporation has equally been talking of new planned projects and grand production plans. However, many industry watchers are not impressed as they see the reported plans as being essentially ‘political talk’ that is being let out for negotiation effect in the unfolding circumstance in which the corporation has presently found itself.
Again, while it is true that the ongoing COVID 19 pandemic has surely taken its toll on the corporation, what with the challenges of lowered prices, stalled cargoes and output reduction, the fact of the inability of the corporation to deliver even greater value when it was experiencing better economic fortunes have also made many to conclude that the corporation is indeed some basket case that requires comprehensive structural resetting.
Indeed, these are very clearly tasking times for the Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mr Mele Kyari as he is saddled with the burden of taking the corporation through these transition times given his status and role as its Chief Operating Officer.
Born on January 8, 1965, in Maiduguri, Borno State in Nigeria’s North East region and educated at the Government Community Secondary School, Biu, Borno State and the University of Maiduguri, the trained geologist was, before he assumed office as the 19th Group Managing Director (GMD) in the annals of Corporation, the Group General Manager, Crude Oil Marketing Division of the NNPC. He has also been the Nigerian National Representative at the Organization of Petroleum Exporting Countries (OPEC) since 2018.
Assuming office in July 2019, Kyari, who joined the corporation in 1991, rose steadily through positions at Integrated Data Services Limited, the Department of Geological Survey of Nigeria, the National Petroleum Investment Management Services (NAPIMS) and the Crude Oil Marketing Division (COMD). From these vantage spots, Kyari had come to acquire front row knowledge of the workings of the industry. But as everyone knows and can see now, this is indeed a time like no other, and one that tests the soul and spirit of even the best-prepared managers of men, resources and organisations.
The era of declining prices
You can, therefore, imagine the fits and starts that would have lately been a natural part of Kyari’s waking and sleeping moments. With the recent incidence of unprecedented descent in global oil prices, a drop in global demand and overall fluctuations in the market, it has indeed been a harrowing experience for many an oil manager. As at the time of writing this piece, there were still price shocks in the market even as selling agents the corporation was still having tons of cargo that were still in search of yet elusive buyers.
Fluffy federal structure
Kyari’s challenge is not made any less difficult by the fact that Nigeria’s mismatched federal structure today has unwittingly encouraged both public and private sector functionaries at different levels to ‘lazily’ wait upon the NNPC and by extension the omnibus Federation Account almost literally for their breakfast, lunch and dinner! Whether it is state governors and local government chairmen who want the money to continue to remain in charge of their bits of the federation or businesses in search of foreign exchange with which to source imports and continue to operate in the import-dependent economy that we run, there is a steady stream of pressure on the NNPC GMD to almost literally bring water out of the rock!
Complaints about marginalization
Even before the current COVID-19 season and its additional burdens, the office of GMD of the NNPC had indeed been gripped in a suffocating crisis of political interpretation. With about half of the Nigerian population mired in poverty, a non-decelerating birth rate, non-improving educational sector and poor productivity overall, the NNPC has come to be heavily burdened as being about one of the few organizations that make up a kind of oasis in an arid landscape of squalor, want and non-engagement. Thus, almost everyone with a university degree or even less wants to work in the NNPC and political battles are regularly pitched over which segments of the nation may be getting a far more disproportionate share of the NNPC largesse at the expense of other contending segments and interests.
Only a few weeks ago, the Pan Niger Delta Forum, PANDEF penned a widely publicized protest note to the authorities complaining over the skewed nature of appointments into the principal power positions in the corporation. Dutifully, the corporation has since made a statement explaining that it ensures basic fidelity to competence and best practices in both the recruitment and promotion of its personnel but not too many out there are persuaded. The rain never stops falling.
Politicians’ piggy bank
One of the other perception issues related to the NNPC is that it is the politicians’ piggy bank. Other than what it does as the prime provider of funds to the government, it has also been said to be one of the first go-to institutions when politicians desire to fund their next electoral contests more particularly at the federal level. Even in the recent COVID 19 era, the Corporation has been rushing to the aid of both governments and individuals; shelling out funds either to get stuff like Personal Protection Equipment, PPEs for medical personnel engaged in the frontlines of fighting the pandemic or the payment of hotel bills and associated lodging costs for returnee Nigerians.
Dangote is coming
But perhaps the greatest challenge to the NNPC today is its future. For many years the corporation seemed to have settled into a mould where it was not under any real pressure to deliver value-for-money. Today, however, the terrain is changing with the projected coming on stream of the Dangote Refinery Petrochemical Complex and a few other smaller modular-type refinery developments in notably the Niger-Delta region of the country. How would NNPC play in the upcoming era?
This is the challenge today before Kyari, who if he continues to keep the job, could eventually end up in history as the last of the strong breed, the transition manager who supervised the process of transforming the NNPC from an imperial economic behemoth and monopoly to a news organization that is primed to share power with other new entrants into the field as the Dangote Petrochemical Refinery Plc. How would that day exactly and eventually play out?
Retail as low hanging fruit
Some analysts think that part of the thinking going forward for the corporation would be for it to use the enormous state-backed retail leverage it had developed in the past to maximum advantage in the years ahead.
Given the challenges that have come with the scarcity of products and the hike in pump prices over the years, the corporation had been encouraged to go full throttle on the statist model of setting up newer and newer retail openings to serve as some kind of price control mechanism. It is this network that commentators say it should focus on making available as distribution centres to other nimbler and better-focused local refiners that are presently gearing to go.
While there is no categorical outline about this yet, however, some industry analysts are already hazarding how things are likely to pan out on that new day. According to Chike Okafor, a well-heeled industry player who spoke with Business Hallmark recently, the signs are evident that a very massive reset would inevitably follow in the wake of the coming on stream of the Dangote refinery and other fleet-footed private sector operators.
‘I think the management of NNPC should begin to brace for the days ahead. With players like Dangote Refinery being able to negotiate deals to get crude supplies without extraordinary constraints, and perhaps at costs that are lower than the designated international rates and with their not being hamstrung by factors and variables like taxes (at least in the pioneering era), demurrage, storage, shipping and landing costs and foreign exchange price fluctuations, they may be able to make net savings of about 40 per cent if not more in terms of their basic cost structure relative to the current prices of mainly imported refined products. With this, they would be on quite a firm footing to crash prices which the already hamstrung NNPC may not be able to match. It will indeed be a new day where the NNPC would almost invariably be struggling to catch up; and where it may be circumstantially constrained to open up its retail centres for the dispensing of products from these newer entrants if it would not suffer the fate of previous monopolies like NITEL and NEPA.’
For the embattled dinosaur, these are very clearly not easy times.