High expectations as NNPC takes off as a corporate entity
Next week, President Muhammadu Buhari will unveil a Nigerian National Petroleum Company Ltd (NNPCL) that will take off with a capitalization of N200 billion, raising high expectations from oil industry watchers.
Daily Trust in this article breaks down what Nigerians should expect from the new corporate entity whose shares would be owned by over 200 million Nigerians, carrying out business in a regulated manner under the provisions of the Companies and Related Matters Act ( IT MADE ME).
The transformation of NNPC into a CAMA company followed the implementation of the Petroleum Industry Act 2021 (PIA) which was signed by Buhari on August 16, 2021 after the passing of the Industry Bill (GDP) by lawmakers in July 2021.
Quickly after the implementation of the sections of the NNPC, the national oil company’s reform journey began, first with the Corporate Affairs Commission (CAC) incorporating the NNPC on September 21, 2021.
According to extracts from Section 53(1) of the PIA, the Minister of Petroleum Resources is required to incorporate NNPC Limited within six months of the promulgation of the PIA in consultation with the Minister of Finance on the nominal shares of the company.
Daily Trust reported that it was done with registration number: RC – 1843987 while retaining the NNPC Towers in the Central Business District, Herbert Macaulay Way, Abuja, as its business address.
The Ministry of Petroleum Incorporated and the Ministry of Finance Incorporated have become Persons of Significant Control (PSC) and, as a limited liability company, NNPC will be required to pay taxes and dividends to its shareholders.
With registration by the CAC, NNPC Ltd was launched with an initial capital of N200 billion, making history as the company with the highest registered capital in Nigeria, and even in Africa, according to reports. responsible.
What this means for a new NNPCL
With the incorporation backed by the CAC, the first thing Nigerians expect is to see an NNPCL devoid of the government interference that has plagued the opaque operations of the NNPC over the years.
During a recent meeting to discuss the implementation of the PIA, an oil and gas governance consultant, Henry Adigun, called on the new drivers of the NNPCL to improve transparency, saying, “The NNPCL has improved disclosure but did not improve transparency. We can commend the NNPCL for moving from opacity, but they need to move to become clearer.
The oil and gas expert also expressed concern about the non-payment of NNPCL to the federation’s coffers since March 2022, saying more states would start to lag behind in paying wages, among other issues.
However, with plans on the ground, from July 19 when the new NNPCL takes off, those things are set to change. The new processes, strictly guided by existing CAMA regulations, are expected to transform the incorporated company into a more efficient and leaner national oil company capable of independent decision-making.
This will solve the problem of a heavy but redundant workforce that Adigun worried about as he questioned last week the huge burden on NNPCL employees with more than 3,200 staff not working. doing nothing in moribund refineries.
As expected, the new NNPCL will serve as a holding company for all its subsidiaries, more than a dozen of them, in the post-PIA era, rightly positioning staff towards good productivity.
The new NNPCL will review its existing assets and liabilities, determine which ones it intends to operate based on sustainable business principles, and incorporate these assets into its balance sheet. This is in line with Section 54 of the PIA, which provides that all assets and liabilities of NNPC will be transferred to NNPC Ltd within the first 18 months of the term of the PIA.
When the transition takes effect, existing contracts and Joint Operating Agreements (JOAs) with NNPC will be assessed and transferred in accordance with agreed principles to ensure business continuity.
Nigerians should expect further expansion of its downstream operations. For example, there would be more NNPC service stations, gas storage and bottling plants, among others, while being eligible to develop modular or small-scale refineries as well as the ongoing massive refinery rehabilitation to increase the supply of petroleum products in Nigeria.
More funding for NNPC operations
Speaking at the recently concluded Nigeria Oil and Gas (NOG) conference in Abuja, Group Managing Director and CEO of NNPCL, Mele Kyari said that by July 19, President Muhammadu Buhari will unveil the NNPCL company. , who will make the decisions, and easier financing and acquisition of the best assets for the incorporated oil and gas business.
Therefore, as NNPCL becomes a CAMA-operated company, it requires more funding outside of government appropriations and this can only be guaranteed as long as it pushes for credibility and transparency.
NNPCL recently said it had secured a $5 billion corporate finance commitment from the African Export-Import Bank (Afreximbank) to finance major investments in Nigeria’s upstream sector. This may be part of the initial funding for the activities of the new entity.
Company management also hopes to raise between $3.5 billion and $5 billion in corporate funding to fund major upstream investments and would push to regain ownership from non-investing partners through l acquisition of pre-emption rights in the Joint Ventures (JV) sample, in accordance with Article 65 of the PIA, which encourages JV operations.
In its future operations, the company should declare dividends to its shareholders after a financial year. The shareholders are for now represented by the government at the nascent stage but will eventually expand to the public when it decides to have an initial public offering (IPO). The company can also retain 20% of its earned profits as retained earnings to expand its business, as any other incorporated company does. Experts said this was a clear change from what had been achieved in the past with NNPC as a corporation.
Further supporting this financial momentum, the NNPC boss said that one of the things that will be different is that it should become a commercially oriented, for-profit national oil company that would be the envy of all players in the sector. .
He further explained that the NNPCL would be run as a private sector company and unlike before when it was owned by the government, the NNPCL is expected to become more efficient in its operations.
This, he noted, will enable the company to effectively maximize returns on investment for Nigeria’s 200 million people, ensure returns for shareholders and pay taxes to the government.
Kyari said: “It will just be another Shell or another Waltersmith and that means decision making will be easy and going back to the theme of this conference, funding will also be easy.”
He pointed out that although today NNPC is in a good position, having reported a profit of N287 billion, with the assets it has, the company can be transformed into a multi-trillion Naira business organization.
He said that when NNPC becomes a limited liability company, it will operate in a competitive environment, with the sole aim of making a profit.
On the outlook for the new NNPCL, Kyari said, “NNPCL is here to be the partner of choice; we will be the largest capitalized company in Africa and we will be the largest indigenous oil and gas company in Nigeria and so there will be no distinction between NNPC and the partners. We also acquire assets and we will acquire the best of assets,” he said.
NNPCL Chairman of the Board, Senator Margery Chuba-Okadigbo, said the NNPC in the new waiver expands access to gas as a transition fuel while working to reduce greenhouse gas emissions. Greenhouse.
She said NNPCL has decided to revive abandoned and underperforming oil assets to improve oil production in Nigeria while taking decisive action against flaring and gas shortage.
Commenting on the transformation, Engineer William Onuh, a biochemical engineer and oil and gas expert in Abuja, said it was the first historic move to bring the NNPC closer to Nigerians in over three decades.
He said, “The implementation of the corporatization of NNPC in accordance with the PIA 2021 is proceeding well at the moment, and I urge the Steering Committee of the PIA Implementation Team led by the Minister of State for Oil Resources, Timipre Sylva, to push for him to succeed. »
The expert said anything less than that would be a monumental failure on the part of the government and could leave the NNPCL worse off than it was.
He said, “The government should also know that business is no longer business as usual because as a CAMA company, Nigerians can now sue the company and the company can also sue.
“So what Nigerians demand is absolute transparency, accountability in line with global best practice and the goals of the Extractive Industries Transparency Initiative (EITI) with over 50 countries, including Nigeria, lending allegiance,” Engr Onuh explained.