MANY Nigerians are hoping to benefit from the Nigerian National Petroleum Company Limited (NNPC Ltd.), after it transited yesterday from being a full government-owned oil agency, the Nigerian National Petroleum Corporation, to its new status as a limited liability company.
President Muhammadu Buhari had on Tuesday July 19, 2022 officially unveiled the NNPC Ltd., in line with the provisions of the Petroleum Industry Act (PIA) to enable it run effectively and compete with its global peers and allow private investors own shares in the new company.
The NNPC Ltd. is now being structured to be run as a commercial venture. If run profitably, as it is expected to, it would declare dividends and profits to its shareholders, and hold annual general meetings.
‘Commercial vs Privatisation’
There are concerns, however, that the NNPC is merely being commercialised, with the government still retaining majority stake and will be virtually regulated by the ministries of finance and petroleum, rather than be privatised, as is the case with the Nigerian Liquefied Natural Gas (NLNG), where the federal government has only a 49 per cent stake and private investors have the controlling, majority shares of 51 per cent.
An expert in the oil and gas sector, Henry Ademola Adigun, however, doused whatever concern is being entertained, saying the road to full privatisation of the NNPC Ltd is a gradual process.
Adigun told THE ICIR, “What happened yesterday is the beginning of a process of moving to get the NNPC Ltd. more commercially indepenent.
“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.”
Kyari speaks on Initial Public Offer for NNPC Ltd.
The Chief Executive Officer of the NNPC Limited, Mele Kyari, has hinted of the company launching an initial public offer (IPO) by the middle of next year.
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.
Kyari told journalists yesterday at the unveiling ceremony of his conviction that the objective of transforming the NNPC into a limited liability company would be realized by the middle of 2023.
“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.
NNPC Ltd. operates joint production ventures with oil majors, including Shell, Total, ExxonMobil, Chevron and ENI, but anti-corruption campaigners have long asked for the company to be more transparent, calling for the publication of its crude contracts and a statement of accounts.
The Minister of State for Petroleum, Timpire Sylva, was optimistic that the NNPC Ltd would operate as a profitable entity that would declare dividends.
Subsidy will gradually go, no more FG-controlled prices
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 Ltd., he said, “Since the NNPC Ltd. 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.”
A fear is being expressed on the declaration by Kyari that the NNPC Ltd. would no longer be spoon-feeding the Federation Account Allocation and Fiscal Committee (FAAC) with remittances. Confirming the fear, the National Operation Controller of Independent Petroleum Marketers Association of Nigeria, (IPMAN), Mike Osatuyi, said being a limited liability company would certainly have implications on monthly remittances to federation account.
Osatuyi said, “The Federal government has declared the NNPC Ltd. as a limited liability company, limited by shares. If it is a company limited by shares, the government will have its own dividends by the end of the year. Let’s give them time for transtion and restructuring.”
The Executive Director of Extractive 360, Juliet Alohan, told THE ICIR that the NNPC Ltd. would function as an independent entity, while adding value to Nigerians
Alohan said, “It is expected that the transitioning will position the NNPC Ltd 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.
“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.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.