Forty-five years ago, the Nigerian National Petroleum Corporation (NNPC) was established to oversee the country’s crude oil, gas and petrochemical resources. NNPC also had the mandate to manage the joint venture between Nigeria and oil multinationals, and engage in petroleum exploration and production through the country’s four refineries.
Nigeria is the fifteenth largest oil producer in the world and the second largest in Africa after Angola, as of July 2022. Despite being a major oil producer, Nigeria received only four percent of the $70 billion investment inflows into Africa’s oil and gas industry between 2015 and 2019 while the NNPC operated at a loss, every fiscal year.
The oil and gas industry has a significant impact on Nigeria’s economy as it accounts for ninety percent of foreign exchange earnings and sixty percent of total income. But, the industry contributes less than 10% to the country’s overall gross domestic product (GDP). It is for this reason that stakeholders clamoured for its reform and the government and lawmakers introduced variations of the Petroleum Industry Bill (PIB).
PIB was first presented to the National Assembly in 2008 but attempts at passing the bill in 2009, 2012, and 2018 failed woefully due to issues stemming from the executive, legislature, investors, petroleum host communities, and other stakeholders’ complaints. The PIB was introduced to the national assembly as a consolidated bill called the PIB 2020. The bill was eventually passed into law by the national assembly in July 2021 while President Buhari assented to it in August, birthing the Petroleum Industry Act (PIA), 2021.
The PIA 2021 seeks to address the issues of governance, regulatory frameworks, community relations and management of the oil and gas industry, especially the NNPC. Part of the reforms under PIA is the transformation of the NNPC from a state-owned company to an incorporated public liability entity limited by shares. The new NNPC is incorporated under the Companies and Allied Matters Act (CAMA) and would now be focused on attracting businesses and making profits.
The NNPC Limited
The reformed NNPC is a profit-making, independent and commercial venture unveiled as Nigerian National Petroleum Company (NNPC) Limited by President Muhammadu Buhari in July 2022.
Though NNPC has now been commercialised, it still remains in the public sector but the federal government will no longer fund its projects or have control over the staffing. The NNPC limited will cease to be an authority on petrol price determination and subsidy. Also, the limited liability company will now be subject to the regulations of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in its operations within the oil and gas industry.
Meanwhile, the rebranded corporation has an initial shareholders fund of N200 billion evenly held by the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated. But, it will no longer remit funds to the Federation Accounts Allocation Committee (FAAC). Going forward, NNPC Limited is expected to operate above board and mandatorily disclose its financials annually.
To shore up its revenue and valuation, the new business is expected to start an initial public offering (IPO) of its shares by mid-2023, this allows diversification of its shareholders base. Beyond all these, Nigeria’s energy sustainability is at stake under NNPC Limited.
Will NNPC Enhance Nigeria’s Energy Sustainability?
Over the last decade, the old NNPC’s strategic business units (SBUs) and Corporate Services Units (CSUs) operated consistently at a loss. When the corporation published its audited financial statement for the first time in 2020, it showed a profit of N287 billion and an accumulated loss of N1.53 trillion. The financial report revealed that the four refineries recorded N154 billion in losses with the Kaduna refinery incurring 42% of the total loss, without generating any revenue during the fiscal period.
The old NNPC stated that it would privatise these refineries by the end of 2022 to boost its productivity but the implementation of the privatisation policy was non-existent in the third quarter. However, this is where the new NNPC will show its readiness for business and enhance productivity, by making sure that Nigeria’s refineries become more productive.
Recently, Nigeria’s daily oil production dropped amidst the Russia-Ukraine conflict as evidenced in OPEC’s monthly output data. Other major oil exporters were benefiting from the drop in the global energy supply caused by Russia’s gas cuts but Nigeria was unable to meet its supply quota.
The NNPC limited which will no longer be in charge of subsidy has announced plans to aggressively grow its petroleum products retail outlets across the country by 174 percent from 547 to 1,500, within six months. Though it will take time, it shows that the new company is ready to live up to its motto, ‘energy for today, energy for tomorrow’ and drive energy sustainability within the country.
Nigeria’s proven gas reserves are estimated at over 206 trillion standard cubic feet and unproven potentials of over 600 trillion cubic feet. The old NNPC initiated several gas development infrastructures to harness these resources for export value.
There is the ongoing Ajaokuta-Kaduna-Kano (AKK) pipeline designed to convey over eight billion standard cubic feet (SCF) of gas from the Niger Delta region for supply to industries in Kano and adjourning states in the northern part of the country. Ever ambitious, it is promoting the construction of the West African Gas Pipeline (WAGP) in collaboration with Togo, Benin, and Ghana, to deepen gas supplies and utilization within the ECOWAS sub-region.
The old corporation has also revived the construction of the Trans-Saharan gas pipeline in collaboration with the Niger Republic and Algeria and is leading on the Nigeria-Morocco Gas Pipeline (NMGP) designed to transport Nigeria’s gas to European markets. NNPC Limited has its work perfectly cut out in driving energy sustainability with the private venture. These projects will allow massive production and supply of gas within Nigeria, West Africa, and beyond.
Old NNPC instituted the Transparency, Accountability, and Performance Excellence (TAPE) strategic road map. This roadmap will be helpful for NNPC Limited’s mandate as it will enhance its potential and capacity to compete with other national oil companies around the world towards attaining efficiency and global excellence. The new NNPC is expected to sustain the TAPE agenda, by ensuring its operations are transparent and in line with due process and overall efficiency.
A few weeks after NNPC limited was unveiled, the Exxon-Seplat debacle unfolded but NMDPRA showed its readiness to checkmate the government’s involvement in the oil and gas industry. The NNPC limited is also showing that it can handle being transparent in its dealings.
However, there are still concerns that the reformed private company is an old engine fixed with a new body. This sentiment is valid as the old NNPC is viewed as one of the country’s enablers of corruption. Nonetheless, it is too early for an impact analysis of the new venture.
If the new NNPC gets it right, it could become another success story of a private sector-led oil company, like ARAMCO. But, this can only happen if the government shows political will and the oil industry shows its readiness to use the newly-found independence and reform to drive energy sustainability.