On Tuesday last week, Nigeria’s national oil firm transitioned from a corporation to a limited liability company, marking a milestone after over 44 years of its establishment. In this report, Emmanuel Addeh examines what this change means for the new Nigerian National Petroleum Company Limited (NNPCL) and aggregates stakeholders’ perspectives on the future of the organisation.
The commercialisation of the Nigerian National Petroleum Corporation had been the subject of discussions for decades, although there was hardly any framework for its implementation.
But with last week’s unveiling of the entity as a Corporate and Allied Matters Act (CAMA) firm, as enunciated by the Petroleum Industry Act (PIA), the ground may have now been set for a reformed national oil firm, perhaps ready to compete with its peers globally.
BREAKING FROM THE PAST
The old NNPC, even its operators will admit, had a not so enviable past. Not a few Nigerians will believe anything about the now defunct entity, since over the years, they had lost faith in its operations.
Although, there have been attempts, especially in the last few years to make it more transparent and accountable to Nigerians, critics of the organisation affirm that those measures have not been far-reaching enough.
Indeed, under the current management led by Mallam Mele Kyari, the 44-year-old NNPC, has joined the global Extractive Industries Transparency Initiative (EITI), declared first profit in about four and a half decades, released its Annual Financial Report to the public and has generally been more open to public scrutiny.
With the company now fully transitioned to a commercial entity, the managers of the new NNPC, now renamed NNPCL say things are even about to get better.
With the official presentation of the company as a commercialised, CAMA entity done now, a number of initial changes will have to be effected to actually ensure a smooth operation for the brand new company.
Although its ownership has not changed, at least for now, still being 100 per cent owned by Nigerians, among others changes, the NNPC will no longer require government funding for any of its business activities.
Secondly, it will from now on, not be subject to the inhibitions of statutory regulations like the Treasury Single Account (TSA) as well as the Public Procurement and Fiscal Responsibility Acts which would ordinarily slow down its turnover time in meeting its obligations to its creditors and partners.
In addition, since it will be needing to borrow to finance some of its projects , the NNPCL will naturally require to be transparent, put all the books on the table and prepare its accounts like any other CAMA company so as to rev up its credibility in the eye of its creditors.
Furthermore, it will only now pay taxes and royalties as required by the new law and pay dividends at intervals agreed upon with its shareholders, the over 200 million Nigerians, whose stakes are currently being held in trust by the ministry of finance incorporated and the ministry of petroleum incorporated.
If anybody was excited at the transformation of the NNPC to NNPCL, it had to be President Muhammadu Buhari. At the colourful event to officially unveil the new NNPC, the president who outlined his aspirations for the entity, explained that the changes were meant to transform the petroleum industry, to strengthen its capacity and market relevance for the present and future global energy priorities.
By chance of history, he recalled his privilege to have led the creation of the NNPC on the 1st July 1977, signing of the PIA 44 years later and then the creation of a commercially-driven and independent national oil company that will operate without relying on government funding and free from institutional regulations.
Buhari stated that from now, the NNPCL will conduct itself under the best international business practice in transparency, governance and commercial viability.
“NNPC Limited will operate as a commercial, independent and viable NOC at par with its peers around the world, to sustainably deliver value to its over 200 million shareholders and the global energy community, while adhering to its fundamental corporate values of integrity, excellence and sustainability.
“NNPC Limited is mandated by law to ensure Nigeria’s national energy security is guaranteed to support sustainable growth across other sectors of the economy as it delivers energy to the world.
“It is therefore my singular honour and privilege on this historic day of 19th July 2022, to unveil the NNPC Limited, with focus on becoming a dynamic global energy company of choice to deliver energy for today for tomorrow, for the day days after tomorrow,” an obviously elated Buhari stated.
Describing the event as historic, Buhari noted that the country places high premium in creating the right atmosphere that supports investment and growth to boost the economy and continues to play on important role in sustaining global energy requirements.
LEAVING PAST WOES BEHIND
The Minister of Petroleum Resources, Chief Timipre Sylva, has also been telling Nigerians that the NNPC or indeed the entire oil and gas industry is now leaving behind its past woes with the signing of the PIA and commercialisation of the national oil firm.
According to him, while the country was waiting for the PIA, Nigeria’s oil and gas industry lost about $50 billion worth of investments, noting that between 2015 and 2019, KPMG stated that “only 4 percent 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 reserves.”
“We are setting all these woes behind us, and a clear path for the survival and growth of our petroleum industry is now before us. With the PIA assuring international and local oil companies of adequate protection for their investments, the nation’s petroleum industry is no longer rudderless.
“The NNPC Limited will operate as a profitable commercial entity and declare dividends to its shareholders. The company will demonstrate higher level of performance and accountability to continue to win the hearts of its over 200 million shareholders.
“The unveiling of NNPC Limited today is a new dawn in the quest for the growth and development of the Nigerian oil and gas industry, opening new vintages for partnerships,” he assured.
Stressing that expectations and optimism remain high with the unveiling of the NNPC Ltd, Sylva noted that there was no doubt that the leadership of the brand new limited liability company is super-charged to meet the high expectations.
TOP 50 SPOT IN FORTUNE 500
His optimism is infectious and his projections are ambitious. The Group Chief Executive of NNPCL, Kyari, appears to be undaunted in his belief in the seemingly resurgent company.
Indeed if his plans go well, he projects to take the new commercial entity to the top 50 among the Fortune 500 Companies in the next three to four years. That sounds really ambitious. But he says it’s achievable.
Kyari believes that with the huge assets available to the company and the new corporate culture of profit orientation, NNPCL will soon become the toast of the entire continent.
While admitting that because of the mode of operation of the company in the past, Nigerians had previously lost faith in it, Kyari stated that henceforth the company has no room for excuses not to deliver on its mandate as a commercial venture.
“We have to deliver together and we are ready to deliver. We know our shareholders, the 200 million Nigerians are doubtful, but we need to surprise them because we know that there is a new expectation and this expectation can be met and this will be led by culture change.
“Before, you could lose money and nothing will happen, government could always pay, but the law now says we have no recourse to public funds, it will be a commercial relationship…and we have no room for excuses,” he assured.
Kyari pointed out that the net assets of the new company remain a major factor working in its favour, stressing that upstream assets alone could be worth between $80-$90 billion.
“The meaning of this is that the NNPC will clearly not be below 150 (currently) in the Fortune 500 companies and I can tell you this upfront: Our target is that by sheer act of doing things right, we are getting into a business, delivering value and investing appropriately and within three to four years time, we should be counting ourselves among the first 50 in the Fortune 500 companies,” he explained.
The GCEO disputed insinuations that the NNPC is presently in a ‘deep financial hole’ insisting that no company declares profit when its finances are in trouble like the NNPC did last year.
He added that although Nigerians were losing faith in the NNPC as a corporation, the company will shock its doubters by its new mode of adopting global best practices in its operation.
“Things have changed and that change is now being amplified because we have an enabling legislation and we are bound by a new set of rules under the Companies and Allied Matters Act (CAMA),” he noted.
Stating that the oil and gas industry remains a very profitable one and that the company was willing to scale up its value, he lamented that oil firms less than half of NNPCL’s assets were making more profit.
“ We are going to be IPO ready by the middle of next year,” he reiterated, insisting that the company’s processes will henceforth be world class, reducing wastes as well as paying more taxes to the government.
Already the largest company in Africa, Kyari noted that Nigerians will be proud of the new NNPC in years to come, with a clear deviation from the way it operated in the past.
In the coming years, he stated that the company will have private equity, explaining that this will mature in the next 11 months, culminating in a mixed ownership of its shares.
“ We are not in the rank of companies which will be talking about N287 billion (its profit in 2020). We felt very little doing that last year, but we also know we are coming from a past. It’s a process and it will be scaled up,” he added.
In a separate forum, the NNPCL Chief Financial Officer, Umar Ajiya, explained that other commercialised government businesses failed in the last because in those circumstances, the code of corporate governance was not institutionalised.
For him, in the short to mid-term, the NNPCL will require private funding so that all control mechanisms will be fully activated, reason why transparency and accountability will be the watchword, going forward.
“ That’s why in the PIA, the law envisages that we should go public. When you bring private equity participants, they will ensure that the code of conduct works and that if the board is not performing, it’s easy to fire them and if management is not doing its work, it will be fired by the board,” he added.
Meanwhile, the Nigeria Extractive Industries Transparency Initiative (NEITI) through its Executive Secretary, Dr. Ogbonnaya Orji expressed hope that with the transition to a commercial entity, the NNPCL is now in a better position to compete favourably with leading international oil companies around the world.
“Nigeria needs a business oriented NNPC to deliver the country’s energy needs, energy transition, energy security, diversification of its economy and the building of a sustainable energy future for the country”, Orji noted.
He further explained that the immediate challenges that the new NNPC needs to tackle is to free Nigeria from fuel importation.
He commended the new team in NNPC and the present administration for the political will to get the reform done, expressing confidence that the NNPC Ltd will live up to its obligations as a supporting company of the global EITI.
With the unveiling, Orji stated that some of the provisions in the PIA had been met, while NNPC ranks among national oil and gas companies to be publicly listed in Africa with an initial share capital of N200 billion and net assets of more than $59 billion.
“NEITI is confident that the PIA Steering Committee (PIASTEERCO), of which it is a member, will ensure that the provisions of the PIA are implemented to the letter and Nigeria’s oil and gas industry is positioned for a profitable and sustainable future,” Orji said.
With the assurances by the authorities, stakeholders and industry players, the NNPCL, it would appear, cannot afford to fail.