Last week’s Tuesday unveiling of the Nigerian National Petroleum Company (NNPC) as a limited liability company by President Muhammadu Buhari, may have opened a fresh vista of opportunities for investors within and outside the country willing to do business with the company to create additional jobs and earn more revenue for the country.
Prior to now, the perception of NNPC as an opaque and bureaucratic government agency has created a lot of setbacks for it in terms of attracting the right partners and funding.
However the signing into law of the Petroleum Industry Act (PIA) by President Muhammadu Buhari, appears to have changed all of such negative perceptions by freeing the NNPC from all its initial bottlenecks that stunted its growth from inception in 1977.
The new law has now given the new entity a high level of independence, especially in the areas of recruitment, decision making, sourcing for funding while its responsibilities to the Federal Government are now clearly spelled out.
Indeed, the PIA also mandates the NNPC Limited to conduct its affairs on a commercial basis in line with the Companies and Allied Matters Act (CAMA).
According to the law, the company will run on a commercial basis in a profitable and efficient manner without recourse to government funds. It shall declare dividends to shareholders and retain 20 per cent of profits as retained earnings to grow its business.
The new NNPC will no longer remit funds into the Federal Account Allocation Committee(FAAC). This invariably means no more money to be shared by state governments, a development that is already tearing governors and the federal government apart.
Sector 54(9) provides that the initial capitalisation of the NNPC Limited will not be less than its financial requirements to effectively discharge its commercial duties and deal with its obligations and liabilities transferred to it.
Buhari assures of value addition
President Muhammadu Buhari had noted that the provisions of PIA 2021, have given the Nigerian petroleum industry a new impetus, with improved fiscal framework, transparent governance, enhanced regulation and the creation of a commercially-driven and independent National Oil Company that will operate without relying on government funding and free from institutional regulations such as the Treasury Single Account (TSA) Public Procurement and Fiscal Responsibility Acts.
‘‘It will, of course, conduct itself under the best international business practice in transparency, governance and commercial viability,’’.The President assured that 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.
According to him, 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, saying 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.
Stakeholder optimism
Professor Emeritus in Petroleum Economics and Executive Director, Emmanuel Egbogah Foundation, Prof Wunmi Iledare in an email response to Daily Sun Inquiry on what NNPC limited portends for the economy said it is a new beginning g for Nigeria oil and gas industry for in many ways, saying it is gratifying to see the PIA provisions at work.
He noted that the new dawn in the oil and gas space in Nigeria and the NNPC Limited in particular, comes with challenges and opportunities in this PIA 2021 era.
First, he said NNPC Limited is a commercial entity now with mission and vision to maximise stakeholders’ economic value, just as Shell, Total and Chevron do.
Unlike the old NNPC, which basically tends to maximise public policy in-kind value, he explained that PIA 2021 expects less agency roles for NNPC Limited if not even zero agency roles.
To a large extent, he said NNPC has been the “cash cow” for the Nigeria Central Government in particular and the Federation in general over the years, collecting oil and gas rent, spending on behalf of the federation, and offering other in-kind services to the FG with inappropriate payment for such services, warning that in the post PIA, NNPC cannot legally do these agency role without consequences under the PIA.
‘‘There are KPIs to justify investor’s continuous investment and in-kind services without payment, are not part of the KPIs.
Yes, the federation currently owns all the shares at the moment but only for a while. PIA demands selling shares to the public. Thus, the Federal Executive can no longer get involved in the structure and philosophy of NNPC Limited. No interference in manpower development and deployment, is henceforth”.
On concerns about Government interference in the new NNPC, an oil and gas expert in his comments to International Centre for Investigative Report (ICIR), Mr. Henry Ademola Adigun, however, doused whatever concern is being entertained, saying the road to full privatisation of the NNPC Limited is a gradual process.
Adigun said, “What happened yesterday is the beginning of a process of moving to get the NNPC Limited. more commercially independent.
“For now, it could negotiate independent businesses and source for deals, and there will be more disclosures on how its operations are run. It will be independently run, and open its book more now to the public, like its peers, Brazil’s Petrobrass, Saudi-Aramco and other publicly qouted national oil firms do.
“However, the template and the mode of transiting to a commercial entity will be communicated after meetings between the Ministry of Finance Incorporated and the Ministry of Petroleum Resources.
A process has just begun, let’s follow it with patience.”
A former Executive Director, Engineering and Technology, of the NNPC, Godswill Ihetu, said the transition would enhance competitiveness and lead to the gradual phase-out of petroleum subsidy.
“We won’t have a controlled price nationwide, as the marketers have to factor in price differentials and bridging costs in their business, devoid of a price-controlled regime.
“The NNPC will operate like any other petrol-selling company, but will still maintain its status as the importer of last resort. It will import products, sell and compete with other products,” Ihetu said.
Commenting on the constitution of the board of the NNPC Limited., he said, “Since the NNPC Limited are the ones constituting the board on behalf of the Minister of Finance and the Minister of Petroleum, you would expect that there should be inputs from the Governors’ Forum.”
More jobs for Nigerians
The Executive Director of Extractive 360, Juliet Alohan, said the transition to NNPC Limited means more jobs for Nigerians.
“More Nigerians will be employed at the refineries, businesses that thrive along the refining value chain will return to life and Nigerians will be the beneficiaries.
“In terms of Nigerians directly buying the company’s shares, the process will be clarified in the days and weeks ahead.
“I believe the company will be listing on the Nigeria and international stock exchange sooner than later,” she said.
Alohan added that the NNPC Limited would function as an independent entity, while adding value to Nigerians.
“It is expected that the transitioning will position the NNPC Limited to function better as an independent entity, devoid of government interference and control. This will allow the company to operate in line with global best practices and deliver enhanced value to Nigerians.”
She stressed that enhanced operations by the NNPC Ltd would translate to more jobs for Nigerians, especially when the company takes the bold step to end dependence on product import, rehabilitates local refineries and begins refining.
IPO as benefit for Nigerians
Group Chief Executive Ofiicer of NNPC Limited, Mr. Mele Kyari, assured Nigerians that the company will launch an Initial Public Offer (IPO) whereby Nigerians can stake their funds as shareholders of the company by middle of 2023.
He added that the NNPC Limited was floated with an initial capital of N200bn making history as the company with the highest share capital in the country.
An IPO will allow a proper valuation of the national oil company and diversification of the shareholder base to include institutional and retail investors rather than just the Federal government.
“We are convinced that by the middle of next year, this company will be IPO-ready, which means that you will have the system, processes and a company that is accountable to its stakeholders and shareholders,” he said.
As a commercial entity, NNPC Ltd will no longer have access to state funds. Its shares and assets, including oil blocs and refineries, are now held by the ministries of petroleum and finance.
He assured stakeholders and the 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 market 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.