THE Nigerian National Petroleum Company Limited’s (NNPCL) contract liabilities for crude oil supply to foreign creditors currently rose to N3.89 trillion amid the struggles by domestic refineries to access feedstock.
The Dangote Refinery has been making efforts to start getting crude oil supply locally but that has yet to materialise, despite the federal government’s directives.
The struggle has seen the management of the Dangote Refinery raising outbursts against the regulatory authorities in the oil and gas sector and accusing the international oil companies of frustrating their effort to start lifting crude to serve the company’s 650,000-capacity nameplate refinery.
Although President Bola Tinubu had intervened, the indigenous refinery’s hope of getting crude oil from the home-soul has been shifted till October.
While the Dangote Refinery and others keep hope alive, the NNPCL 2023 audited financial statements released on Tuesday, August 20, show that the state-owned oil company currently owes N3.89 trillion in crude oil forward sale agreements to foreign creditors.
The contract liabilities surged by 34.44 per cent compared to N2.89 trillion it was in December 2022.
Analysis of the financial statements by The ICIR shows that the contract obligation arose from forward sale agreements, the sale of natural gas, and other contract liabilities.
The report indicated that forward sale agreements stood at N3.37 trillion, the sale of natural gas at N17.30 billion, and other contract liabilities at N498.32 billion.
It further reveals that N3.24 trillion represents non-current contract liabilities and N648.61 billion current contract liabilities.
The above were the “contract liabilities that the group currently has,” NNPCL stated.
A contract liability arises when an entity (in this case, NNPCL) has invoiced a customer or customers and received payment in advance but has not yet supplied the crude for which it invoiced the customers.
Also, non-current liabilities are the debts a business owes but are to be paid after 12 months, while current liabilities are debts expected to be paid within a financial year.
Over the years, there have been concerns about the NNPCL’s quest for continued crude-oil-backed loans amid the country’s struggles to meet the Organisation of Petroleum Producing Company of Nigeria’ (OPEC) quota.
A recent conversation was the $2 billion loan, backed by crude oil, the NNPCL was negotiating to enhance its finances and support production.
The deal puts the NNPCL to commit between 30,000 to 35,000 barrels per day repayment option.
Already, the NNPCL has a $3.3 billion oil-backed loan through the African Export-Import Bank (Afreximbank), which it secured on August 16, 2023.
The emergency crude repayment loan was to support the naira and stabilise the country’s foreign exchange market.
To repay the loan, the NNPCL is to carry out a forward sale of 90,000 barrels per day of Nigeria’s share of offshore crude oil under the production sharing contract (PSCs) with the oil companies.
However, since the deal was signed, experts have been worried over some pitfalls in the agreement.
For instance, despite the crude-for-cash arrangement, the naira has continued on a downward spiral against the dollar.
It has peaked at about N1,900 to a dollar since the beginning of this year and currently hovers around N1,600 to a dollar as against below N1,000 it was last year.
The naira had been under pressure despite the arrangements as the deal “will not solve the problem of the naira,” according to a renowned economist and the chief executive officer of Financial Derivatives Company Limited, Bismarck Rewane.
The chief executive officer of the CFG Advisory, Tilewa Adabajo, who spoke on the financial statement said the national oil company needs high level of corporate governance to attract the high level of investment needed.
“If you take a look at the balance sheets, the current liabilities exceed assets. They have liquidity issues despite saying they have cash of over N7 trillion. The problem with NNPCL balance sheet is that they’ve not optimised debts or equity. There’s a serious corporate governance issues with the NNPCL. The Ministry of Finance incorporated and the Central Bank of Nigeria need serious oversight on the NNPCL, “he added.
There have also been questions about the long-term implications of the swap deal in the nation’s economy amid the country’s growing debt profile.
Nigeria’s total public debt portfolio had surged by 24.99 per cent in a space of three months to N121.67 trillion as of March 31, 2024, according to the Debt Management Office.
Many industry experts are equally worried about the NNPCL’s delay in listing on the Nigerian stock exchange despite having transited to a limited liability company with the signing of the Petroleum Industry Act (PIA).
The company has been shifting the goalpost on getting enlisted in Nigeria’s stock exchange, which could have offered it a platform to source funds.
A cursory at the company’s financial position shows that NNPCL’s capital base (share capital) stood at N200 billion at a time when the bank sector had raised the capital base to a minimum of N500 billion.
At the unveiling of the NNPCL as a commercial entity in July 2022, the group chief executive officer, Mele Kyari, gave the word that the company would be ready to list its shares on the stock exchange by the middle of 2023.
In July 2023, at the Nigeria Oil and Gas Energy Conference and Exhibition held in Abuja, Kyari re-echoed the NNPCL plans to issue its Initial Public Offer(IPO) to investors.
In March this year, at the international oil and gas players meeting at the 2024 CERAWEEK in Houston, United States, he also reiterated that NNPCL would be listed soon in the PIA.
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