May 26, 2024

NNPC Ltd, yesterday, today, in an uncertain tomorrow?



The euphoria and predictable rhetoric around the formal launch of the Nigerian National Petroleum Company Limited are over, and industry stakeholders now await, with cautious optimism, a clearer direction on the commercial agenda of the new NNPC.

The trauma that the entire country went through and is still going through because of the legacy of corruption, thefts, inefficiency, and distortions by the predecessor company is too vivid in the consciousness of Nigerians to be replaced by genuine applause of optimism at the emergence of the new Nigerian National Oil Company Limited.

NNPC as a corporation was founded in 1971 to provide efficient distribution of petroleum products within the Nigerian economy and, subsequently, to export excess petroleum products when the country’s refineries came on stream. Its performances were largely above average because economic dependence on oil was not as overwhelming as in the years following the period of 1979 till date.

The corporation became characterized by widespread corruption and abuse of executive powers by the federal government, which had exclusive rights over most extractive resources.

Political restiveness for resource control soon became the major index for investors, and attempts by successive governments to establish progressive governance over the entire industry have failed to achieve the best of intentions. The LNG sector remained as a major example of the success that was lost in the crude oil production segment.

Today, prior to the exit of the old NNPC and the emergence of the new one, nothing significantly differentiates one from the other. At least in terms of management structure , key personnel, and asset ownership, both companies remain in the shadows of each other. There is no clean break, but a transition from one failed expectation to a potentially similar outcome. Corporate transformation from a negative balance sheet to profitable performance is not a child’s play that is unveiled with fanfare.

Fuel subsidy costs and their attendant crisis are rapidly threatening the ability of the government to honour debt obligations at home and abroad, while inflation weighs heavily on citizens as prices escalate uncontrollably.

The rising cost of diesel fuel and premium motor spirit, as well as the cost of aviation fuel, are key drivers that could turn an economic problem into a political and social crisis. The new NNPC has rightly absolved itself of blame, stating that the government should be held accountable for the brewing chaos.

The Managing Director of the NNPC Limited , Mele Kyari, announced that the NNPC is not rebranding, but “we are moving from a past that is clearly of a definite and different expectation to a new expectation where this company must deliver value and dividends to its shareholders”.

This assertion by Mele Kyari would have been commendable if it had been supported briefly by a strategic outline of how the new company would deliver such values. No doubt, a blueprint will soon be published, as is always the case.

Popular expectations, therefore, that the new NNPC as a National Oil Company will deliver above board public expectations as other large enterprises do, will become more apparent in the course of time, but it is unlikely that radical changes will occur without the active involvement of citizens as stakeholders.

In other words, citizens should be prepared to hold the new company accountable for its actions or inactions.

As presently constituted , the company remains very powerful and it is obvious that it will continue to represent the epicentre of the country’s energy sector, with potential benefits or adverse consequences to the nation’s economic fortunes.

EnergyDay observes that the composition of the company’s board of directors, for instance, is overly predicated on political considerations. The urgent need for a management team that is capable of transforming the company into a profit-oriented commercial entity is critical, and we advise review if the new company will be worth its salt.

EnergyDay further holds the strong view that industry-recognised independent directors should have been added to the present board composition to strengthen and navigate the new company into a more vibrant international energy company from the outset. The company should be independent of political interference at operational and governance levels in order to reduce corruption and promote transparency .

The Petroleum Industry Act is a major catalyst and a control mechanism that could help in moulding the new NNPC into a clean national enterprise that citizens would be happy to identify with, but at a cost.

In theory, the NNPC is owned 100% by Nigerians, but the control and management of the company are not totally insulated from the influence of political abuse. Citizens as stakeholders would need to be more active in the economic affairs of the country, particularly in the oil sector, using the PIA as a legitimate weapon to enforce corporate governance structures that are beneficial and sustainable.

Major issues around corporate governance, culture, accountability, and financial transparency were kept unresolved concerning the old NNPC and its successor, and these will continue to impair favourable public judgement of the new NNPC.

As presently constituted, the company remains very powerful, and it is obvious that it will continue to represent the epicentre of the nation’s energy sector, with potential benefits or adverse consequences on the nation’s economic fortunes.

The future is bright for the Nigerian National Petroleum Company Limited under good management and the right political atmosphere, and investors may not hesitate to stake their resources into the company at the right time when it finally comes.

Nigeria’s potential to create a strong energy hub in Africa within the oil and gas sector and renewable energy through investments in other African economies is as real for the NNPC as it is for other minor private energy companies.

EnergyDay advocates the branding of the new NNPC with an emphasis on new corporate governance culture, transparency, zero tolerance for corruption and a realistic global business vision .