It was a historic event at the State House Conference Centre, Presidential Villa, Abuja, last Tuesday. The atmosphere was rarefied. The glitz, the beautiful ambience of the set tables, the full presidential presence on display, the assemblage of the crème de la crème, that comprised accomplished businesspeople, political power brokers and star-studded musical performances, all pointed to a clear indication that something of a landmark was about to happen. The special rendition of the theme song:”Energy for today, Energy for tomorrow, Energy for everyone” by an Ensemble, was also a demonstration that Nigeria’s oil and gas industry has entered a remarkable transition, from an ‘old order’, to a limited liability national oil company with profit- oriented outlook, anchored on best global business practices.
The transition process, which has been completed, is the transformation of the Nigerian National Petroleum Corporation (NNPC) to a commercial venture, now to be known as Nigerian National Petroleum Company Limited (NNPC Limited). The official unveiling of the new national oil company by President Muhammadu Buhari came a year after its incorporation under the Companies and Allied Matters, CAMA, with a reported 200 million shareholders. The Board is chaired by Sen.Margaret Okadigbo, while erstwhile GMD NNPC, Malam Mele Kyari is the Group Chief Executive Officer. It’s interesting to note that under the leadership of Kyari, the NNPC published its first audited accounts in 43 years after decades of perpetual losses. Therefore, entrusting the affairs of the New NNPC under his leadership is a trust that comes with enormous challenge. The transition has been made possible in line with the provisions of the Petroleum Industry Act 2021, which may go down as Buhari’s most enduring legacy for the petroleum industry. Seen as a game changer, the PIA seeks to reposition the industry in line with best global business dynamics and best practices, free from institutional regulations and procedures. President Buhari underscored the importance of the Act during the unveiling. He said the provisions of PIA 2021 have given the petroleum industry a new impetus, with improved fiscal framework, transparent governance, enhanced regulations and the creation of a commercial-driven and independent National oil company that will not rely on government funding and procedures such as the Treasury Single Account, Fiscal Responsibility and Public Procurement Acts. This is in line with Section 53(3) of the Act.
In effect, the new status of NNPC limited means NNPC will no longer contribute to the Federation Accounts Allocation Committee, FAAC. That in turn, could threaten the financial viability of the 36 states and the 774 local government councils in the country. But, that is good thinking, as it will make the state governments look inwards for their financial survival rather than the current overdependence on monthly allocation from FAAC. But the economic bottom line will transform the hitherto opaque petroleum industry in the country; strengthen its capacity and market relevance for the present and future global priorities. It will be recalled that, while awaiting the passage of the PIB into law, Nigeria was reported to have lost $50billion worth of investments. As reported by KPMG, a renowned global accounting and auditing firm, between 2015 and 2019, only 4 percent of the $70bn investment inflows into Africa’s oil industry came to Nigeria, even when the country boosts the largest producer of oil and gas reserves in the continent.It is heartwarming that Malam Mele Kyari is a seasoned industry professional, and he knows that the task before him is such that success is the answer. He’s also aware that if the New NNPC must succeed and compare favourably with its peers around the world, it must do things uniquely different from the old NNPC, by running an efficient, transparent and accountable energy enterprise that must command the confidence of its shareholders by returning profits on investment. He has already laid out the groundwork for performance and success. He has promised to run a profitable commercial entity that will deliver dividends to shareholders and support sustainable growth across other sectors of the company as it delivers energy across the world.
Besides, he has assured a change in the organisation’s structure with a focus on getting sound results. Hiring excellent talents is one of the ways to accomplish the task and developing their core strengths. For him, the New NNPC “is a smarter, more responsive and more accountable company” that must act within the provisions of the pertaining to running a private, profitable commercial venture that must meet the standards for best practices in the industry. To ensure a higher purpose, all these regulations must be applied in order to deliver back- to- back profit performance. It is also heartening that the Group CEO has set values in two major fronts that will ensure delivering clean energy and dividends to stakeholders. Companies that make sustained progress must meet their mandate to customers, act quickly and take prompt decisions based on excellent systems, procedures, line of profitability and accountability to shareholders. He has given his word that these pictures will be a reality by the middle of next year, when also the company will be out with its Initial Public Offerings (IPO). Investors are eagerly waiting for that day.
Beyond that, Kyari has made a firm promise of a strategic plan initiative that will achieve the mandate of energy security for the country through rolling out a detailed expansion that will increase the company’s fuel retail presence from the present 547 outlets to 1,500 within the next six months. This is encouraging. It speaks volumes about his vision and foresightedness for the company and our economic benefits. It must be said that political will and attention to operational details, are key to realising these lofty goals. He may have to take the template of Saudi Arabia’s Aramco, which has become a global reference point on how to run a successful profitable commercial venture. This is the record: Aramco posted a profit of $110 billion in 2021 financial year. This represents a 124 percent rise in its profit of $49bn in 2020 when global energy demand was severely hit by COVID-19 pandemic. That performance beat analysts’ average estimate of $38.5bn, according to survey by Bloomberg. In the current financial year, its revenues are projected to reach a new high of SR903bn. It requires strict fiscal discipline, prudent management and unflappable commitment to best international practices to achieve this feat. No surprise, major credit rating agencies like Standard & Poor’s, Fitch and Moody’s have given Aramco ‘A’, with outlook ‘Stable’. As of April, 2022, Aramco has foreign reserves of $451.587billion.
Altogether, from my point of view, Aramco’s worthy example holds great lesson for NNPC Ltd. At the same time, the managers of the company must free the country from fuel importation. The Federal Government spent a hefty $36.3bn on fuel importation in five years. Nigeria remains the only OPEC member that imports 95 percent of its refined Petroleum. This means Nigeria’s petroleum imports have exceeded exports by $58.5bn. According to CBN data, Nigeria spent $1.0bn on fuel imports in 2021. According to figures compiled by the National Bureau of Statistics (NBS), in 2020, the Nigeria spent $7.75bn on refined petroleum and lubricants. The country is still experiencing one of the worst fuel crises in recent years, while diesel price has hit all-time high. According to the CEO, Seplat Energy Plc, Roger Brown, the under-exploitation of hydrocarbons in Nigeria has put the country just one percent of the World’s daily oil output. That’s bad enough.
Fuel imports should no longer be a major user of our scarce foreign exchange. Partly because of that, Nigeria’s foreign reserves have been on a downward spiral in recent months, falling to a low $39.77bn on February 15, 2022, from $40.54bn at the end of last year. I believe the best of Mele Kyari is about to come with the NNPC as his new ‘baby’. NNPC Ltd is in capable hands. Fixing our refineries should also be a priority for him. He needs reminding that one of his promises when he took over from Maikanti Baru, as GMD NNPC, on July 8, 2019, was to fix the refineries and end fuel imports by 2023. He now has the golden opportunity to do so. Public expectation is high that NNPC Ltd should succeed. Kyari should take the chance with two hands.