Analysts pick hole in proposed NNPC mgt. Board, give conditions for listing on NGX

Oredola Adeola

The only way the Nigerian National Petroleum Corporation(NNPC) can unlock tremendous value as a proper publicly quoted company is to be majorly owned by shareholders with Government having a minority share.

This was the position of financial and economic experts who spoke in the wake of Government’s recent step towards the incorporation of the NNPC Limited, and decision to appoint the Board and Management of the NNPC Limited, especially as some of the appointees are public servants.

The analysts nevertheless commended NNPC’s recent plan to collaborate with Nigerian Exchange (NGX) Limited, in order to explore several capital market related financing opportunities; including a potential listing on the Exchange.

They urged the Corporation to be more transparent in its financial and operational records , as a way of boosting equity investor’s confidence in the company.
While commending the Corporation for the declaration of two hundred and eighty seven billion Naira (N287bn) Profit After Tax (PAT) in year 2020, and consolidating that effort with publication of its Audited Financial Statements (AFS) for the period under review, the analysts revealed that the Corporation’s gains must be sustained before and after full incorporation, so as to give investors and Nigerians confidence in putting their money into the activities of the Corporation.

Dr. Muda Yusuf, an economist and former Director General of the Lagos Chamber of Commerce and Industry(LCCI), said the directive by President Buhari on the incorporation of the NNPC, demonstrates commitment of the Government to the implementation of the Petroleum Industry Act.

He expressed concern that the entirety of the appointments of Board of the Corporation are political, according to him, this of course, is a reflection of the ownership structure of proposed NNPC Ltd.

He said, “We need to worry about the risk of political interference which has implications for efficiency and professionalism in the governance of the corporation. It is a good start nonetheless. But we hope that as we progress in time, government’s stake in the ownership will be reduced to avoid the risk of meddling by politicians.

“It would be nice to replicate the NLNG model in this new Corporation. This would make it more attractive to investors. It would also enhance its perception by investors, ” the former LCCI boss said. He also noted that the plan to list NNPC on the Stock Exchange would help to unlock tremendous value in the Corporation.

He further averred that; “But for that to happen, the ownership structure must change. If the government remains the majority shareholder in the Corporation, investors sentiments may not be favourable.

Dr. Boniface Chizea, Managing Director of BIC Consultancy Services, who is also an economist and financial expert, described the Government’s commitment to fully incorporate NNPC as a major effort aimed at adding value to the country’s oil company.

According to him, capital market investors are often cautious of long-term financial goals of their investment portfolio before putting their funds into any ventures, noting that NNPC owns prolific and strategic asset on behalf of the country, which if managed well would offer better incentives to its shareholders and the country’s oil industry.

In his words, “Those who will buy the shares will evaluate the risk on returns to investment. No one would put money in an unproductive business and this is why the Corporation on the sideline of the assent of the PIA must be committed to accurate and transparent operational audit.

“The track record of the Corporation is not too encouraging to invest. So, in line with passage of the PIA, NNPC must consistently guarantee its ability to report operating profits, with strong cash flow year-on-year.

“Return on Investment (ROI) is an important decision of every equity investor. The track record of the Corporation is a risk factor that most would consider. For a long time, the Corporation has been used by the Government to enrich some few elites and public officials, while also promoting some ridiculous sectional agenda.

“If NNPC is going to the capital market, it must promise some level of transparency and good governance to be able to work like every other market -driven organisations with good management board and sound directors.

“If the Corporation goes to the Capital market with its recent declaration of first ever profit after over 40 years and an asset worth N4 trillion, it is likely to get more equity cash flow to expand its business potential. All that is needed is to be more open and transparent.

“The sooner NNPC begins to show its resolve and commitment to fully optimise the crude, gas and other mineral endowments, the better for the country. The issues with transition into cleaner energy can be dealt with if seriousness is put into extraction and utilisation of the existing crude and gas reserve.

Dr. Boniface charged the Corporation not to be overwhelmed with the global call for decarbonsation noting the crude oil production is the country’s edge to foreign earning.
He said, “ Extraction of Crude oil is what would guarantee the production of other petrochemicals including natural gas, aviation fuel, Diesel and other by products. Oil will not clear out soon. Dangote and other private operators will also need feedstocks from the activities of NNPC.

He charged NNPC to reposition itself for the transitional era, with production of natural gases. “We need to adopt better ownership structure. We need to tap into solar, hydro and wind energy , we should try to adopt a multiple approach, in order not to put all our investment in one basket..

Tope Fasua, Chief Executive Officer of Global Analytics Consulting Limited, an international consulting firm, noted that the Petroleum Industry Act(PIA) is offering NNPC the opportunity to operate as a commercial entity, thereby giving Nigerians the opportunity to invest in the public offering of NNPC.

He said, “Since the Corporation is showing better prospects in becoming a properly publicly owned company, Nigerians from all walk of life would be willing to invest their emotion and money into the company.

“How the money is going to be invested whether in frontier basin development or other critical investment initiative will be irrelevant to a common investor because business models can change at anytime. For a while now, Saudi Aramco and other OPEC National Oil Companies decided to invest alot in Renewable Energy and that is another business model for NNPC to follow.

“Based on my little findings, the Corporation has been involved in the some investment into renewable energy.

“At the base of the option of going into the exchange market to raise funds, is the need to conduct a self-assessment of how committed the Corporation is to entrenching corporate governance and standard operational principles devoid of sectionalism and political manoeuvring.

“The NNPC’s recent declaration of profit after over 40 years, is a good sign. if the Board is committed to listing on the exchange market, they would have to give their account from time to time to the Security and Exchange Commission(SEC), this is the principles of corporate governance.

“The entry of public firms like NNPC, being one of the most important companies with large asset, is a boost to the shrinking exchange market that has been badly hit by inflation and loss of value on Naira.

“ Reposing of confidence in the companies listed in the Stock Exchange market. There has been more delisting than listing on the SEM in the last ten year and this is unfortunate, because the market is shrinking and heading towards zero. There is a need to find a way to bringing back confidence to the market.

“There is still opportunity, hopefully, if we have better governance structure in Nigeria and economic turn around that would encourage more listing of companies like NNPC.

“I am interested in FDI that would bring money that would stay and improve industry in Nigeria. We need to improve on the tradition of long time investment and not speculative investment – day trading,” Tope Fasua concluded.