BY EMEKA EJERE
The unveiling on Tuesday of a new Nigerian National Petroleum Company (NNPC) Limited by President Mohammadu Buhari, has left stakeholders divided along expectation lines, as the debate of whether or not the development can change the loss-making narrative of the nation’s oil firm rages.
While some analysts celebrate that Nigerians will now enjoy dividends from their oil resources after 45 years of wasteful spending and management, others see nothing more than a change of name unless the underlying problems are addressed.
In accordance with the provisions of the Petroleum Industry Act (PIA) 2021, NNPC had on July 1, 2022, legally transformed into a company that will be regulated under the Companies and Allied Matters Act (CAMA).
The Corporate Affairs Commission (CAC) had on September 21, 2021 completed the incorporation of the NNPC Ltd. The PIA had been signed into law by President Buhari on 16th August 2021, following its passage by the National Assembly in July of the same year.
Specifically, Section 53(1) of the Petroleum Industry Act 2021, requires the Minister of Petroleum Resources to cause for the incorporation of the NNPC Limited within six months of the enactment of the PIA in consultation with the Minister of Finance on the nominal shares of the Company.
With the registration by the CAC, the NNPC Ltd was floated with an initial capital of N200bn making history as the company with the highest share capital in the country.
To prepare for the July 1 take-off as a CAMA company, several engagements took place between the NNPC, the Nigerian Midstream and Downstream Petroleum Regulatory Authority, the Nigerian Upstream Petroleum Regulatory Commission, the Ministry of Petroleum Resources, the Ministry of Finance, Governors, legislators, host communities and other key stakeholders to understand the impact of the changes the PIA brings.
Also, a PIA transition committee was set up to drive the transitioning of NNPC into a full CAMA Company. The NNPC also set up an in-house committee supported by renowned reputable consultants (McKinsey, KPMG, PWC, Wood McKenzie and Olaniwun Ajayi LP) to define and implement the transition roadmap.
This roadmap includes valuation of the assets and liabilities, development of corporate governance frameworks, rebranding of NNPC to NNPC Ltd and change of management.
In line with the PIA, one of the things that will be different with the NNPC transitions is that it is expected to become a commercially oriented and profit-driven national petroleum company independent of government and audited annually.
The aim is to enable the company maximize returns on investment for the 200 million Nigerians, ensure returns for shareholders and pay taxes to the government.
Unlike NNPC since over 45 years of its existence, national oil companies across the world are making profits. In 2020, China Petroleum and Chemical Corp raked in $323 billion, Saudi Aramco made $230 billion at a time when NNPC is making as much as N6 trillion loss to Premium Motor Spirit (PMS) subsidy for lack of refining capacity.
Unveiling the new NNPC, Buhari, who affirmed that the company is mandated by law to ensure that Nigeria’s national energy security is guaranteed, expressed optimism that NNPC Ltd will sustainably deliver value to its over 200 million shareholders and the global energy community; operate without relying on government funding and be free from institutional regulations such as the Treasury Single Account (TSA).
The President, who doubles as Minister for Petroleum Resources, stated that the new NNPC will conduct itself under the best international business practice in transparency, governance and commercial viability.
‘’Our country places a high premium in creating the right atmosphere that supports investment and growth to boost our economy and continue to play an important role in sustaining global energy requirements.
‘’We are transforming our petroleum industry to strengthen its capacity and market relevance for the present and future global energy priorities,” he said.
Minister of State for Petroleum Resources, Timipre Sylva, lauded Buhari for the PIA 2021 that lingered for 20 years, noting that “while the country was waiting for the PIA, Nigeria’s oil and gas industry lost about $50 billion worth of investments.”
“In fact, between 2015 and 2019, KPMG states that “only four per cent of the $70 billion investment inflows into Africa’s oil and gas industry came to Nigeria even though the country is the continent’s biggest producer and the largest reserve.”
The Group Chief Executive Officer (GCEO), NNPC Ltd, Mele Kyari, said the firm has created a robust expansion plan.
“We have taken a strategic initiative to achieve our mandate of ensuring energy security for our country by rolling out a comprehensive expansion plan to grow our oil retail outlets from 547 to over 1,500 within the next six months,” he stated.
He assured stakeholders and global energy community that the new company was endowed with the ‘’best human resources one can find anywhere in the industry.
‘’NNPC Limited is positioned to lead Africa’s gradual transition to new energy by deepening natural gas production to create low carbon activities and positively change the story of energy poverty at home and around the world,’’ he said.
Seeking the real change
However, skeptics have raised issues that are cause for worry. They say the change of nomenclature will amount to nothing if at the end of the day the organization is still run and managed with the same old ways and fashion of the former oil cartel.
According to them, it is a good and proper thing to seek to make the NNPC as efficient and as profitable as Saudi Arabia’s Aramco and other peers elsewhere but the problem is that NNPC is still tied to the apron strings of government, with most of the workers still workers of the Nigerian government.
For them, as a commercial entity, it should be possible for the company to source its own expertise, consultants and staff from anywhere without the Nigerian government imposing the constraints of ethnicity and federal character.
The issue was raised by the former vice president and main opposition presidential candidate, Atiku Abubakar, who accused the government of lifting the policy from his manifesto, but stopped short of the real reform. In an interview with Arise television, he said the reform lack depth and transparency.
“The reform is positive but it cannot produce the desired result because of the dishonesty in its implementation. I will deepen it and ensure that the economy gains from such reform.
“From what I see now, there is no transparency as only the government and NNPC know what is happening. There is need to open everything to all stakeholders, such as state governments and potential investors to understand the processes and participate in them.”
Business Mogul and former President of Nigerian-American Chamber of Commerce (NACC), Olabintan Famutimi, also said that there is nothing to show that the country is ready to get a national oil company that would abide by global best practices.
According to the Tricontinental Group chief, the current transition by NNPC is merely a change of nomenclature. He noted that while most of the profiting national oil firms are run without interference, political overbearing would play out at NNPC.
“Government will still be the one to dictate a lot of things. They are the ones that won’t make the refineries work. They will still dictate who gets a licence and gets access to foreign exchange. I don’t see what has changed.
“Aramco has privatised its operation and is the most valuable corporation in the world. They have the most digitalised operation in the world. But we are retrogressing at a time when we should be making money.
“We are still subsidising oil. The system is designed to allow a few make an unimaginable amount of money from the industry and not allow commercial sense to take over,” Olabintan said.
The Founder and CEO, Centre for the Protection of Private Enterprises Dr. Muda Yusuf, believes that for the new NNPC to become like Aramco in the coming years, political will and a total operational shift would be needed.
According to him, the redundant staff and entities must give way while the company must make efforts to be listed internationally, including offering shares to Nigerians.
“I am expecting a very profitable company. We also want to see the most valuable company. I am also hoping for it to be listed in the international stock exchanges around the world.
“But what is important in all of this is that the business model must be right. We need a business model that moves beyond political interference, interference from bureaucracy and a model that will dilute ownership and ensure that the management of the company is in the hand of professionals.”
For energy analyst, Robert Obioha, the plan to make NNPCL a viable business entity is one of the best achievements of the Buhari Administration.
According to him, “repositioning the NNPC to be like Aramco, which in 2020 made $230 billion or the Chinese Sinopec, which made $323 billion in the same year under reference, is indeed the best way to go.”
He cautioned against the “born again enterprise being affected by the Nigerian factor, the disease of inefficiency and the plaque of corruption, nepotism, sectarianism and other ills associated with this post-colonial entity called the giant of Africa by the sheer size of its population and economy”.
These, he said, are some of the issues the Kyari-led new business outfit should worry about.
“I say this bearing in mind that if the company is not run as a true business concern in line with global best practices, the talk of returning huge profits to Nigerians and other stakeholders will be a ruse, an aborted dream.”
A former presidential spokesperson, Reuben Abati, believes that as long as the NNPC is government-linked, there will be issues. In a piece titled ‘Nigeria and the New NNPC’, Abati argued that for the NNPC to succeed, it needs to function under a government that understands the meaning and implications of profit and loss.
He wrote: “There is a need for deep reform, for the people’s overall benefit. The meaning of the new dispensation is that NNPC would have no option but to send debit notes to the federal government, because the company won’t be able to hide the gaps in its balance sheet.
“The Buhari government does not have this profit and loss orientation mindset that is required to birth a new NNPC. The responsibility for that would have to be taken up perhaps by a new government.
“We can only hope that the would-be next president of Nigeria, whoever he turns out to be, is thinking of this, from both an economic and national security perspective.”