The Policy Advisory Council constituted by President Bola Ahmed Tinubu has proposed divesting significant shares of the Nigerian National Petroleum Company Limited (NNPC) assets in the upstream, midstream, and downstream sectors of the oil and gas industry. As per the report released by the council, the federal government stands to generate approximately $17.4 billion through the divestment of these assets.
The Energy and Natural Resources sub-committees of the advisory council also recommended that Tinubu’s administration streamline the regulatory agencies by merging the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Nigerian Content Development and Monitoring Board (NCDMB) into a single governing body. The council suggested that Tinubu’s administration should restructure NUPRC and NMDPRA to achieve specific objectives and recruit skilled individuals for key positions in the oil and gas industry.
Also Read: Government Can No Longer Fund Subsidy – Mele Kyari, GMD of NNPCL
The council also recommended that the president actively seek out capable and experienced leaders for NNPCL who are dedicated to implementing reforms. It was emphasized that the company should operate as a commercial entity following the provisions outlined in the Petroleum Industry Act (PIA). The council suggested strengthening NNPC and ensuring that it fulfils its financial obligations to the Federation Account by paying taxes, royalties, and profits. Additionally, it was advised that NUPRC, NMDPRA, and NCDMB should effectively regulate NNPC.
While the president has already eliminated petrol subsidies, the council, formed after Tinubu became the president-elect, has recommended further actions. These include deregulating petrol prices and implementing the Federal Direct Cash Transfer Programme, which involves distributing $8 billion directly to the poorest 30 million Nigerians.
The council consists primarily of key figures from the private sector, such as Austin Avuru, CEO of Platform Petroleum Limited, Olu Verheijen, Managing Director of Latimer Energy, and AbdulRasaq Isa, Board Chairman at WalterSmith Petroman Oil Limited. Other members of the council include Bashir Bello, Ifeanyi Ajuluchukwu, Doyin Akinyanju, Tinuade Sande, Ahmad Zakari, George Etomi, Nasiru Wada, Mohammed Abbas, and Segun Lawson.
How Feasible are these Recommendations?
Although these recommendations may appear promising, given the substantial amount of $17.4 billion projected to be raised, their feasibility is highly questionable. Deals involving the sale of oil and gas assets have to go through a bulk of bureaucratic processes that impede or stall the entire process.
Also Read: NNPCL and Daewoo Construction Company Sign $740 Million Contract For Repair Of Kaduna Refinery
According to the Petroleum Industry Act of 2021, the transfer of ownership of oil and gas assets in Nigeria follows a prescribed procedure. To successfully acquire such assets, the license holder must first obtain approval from the NUPRC, after which consent must be sought from the Minister of Petroleum. While this process occupies a few lines on a piece of paper, in reality, this is one of the most cumbersome procedures within the oil and gas sector, and the ExxonMobil deal with Seplat is a testament to this fact.
Seplat has been engaged in a protracted endeavour since February 2022 to acquire ExxonMobil’s upstream assets in a deal worth $1.28 billion. Despite receiving consent from President Buhari in his capacity as Minister of Petroleum, the CEO of NUPRC, Gbenga Komolafe, has asserted that the authority to approve such transactions rests solely with the regulator, which is NUPRC. As a result, Seplat’s efforts to finalize the deal have been met with significant obstacles.
The obstacles encountered in the $1.28 billion deal between Seplat and ExxonMobil offer insight into the challenges that can arise when attempting to sell assets owned by a corporation under the Federation’s ownership. There is no doubt that the corporate governance structure of NNPCL needs significant improvements, and urgent attention is required for its financial management. However, the proposed approach may not be the most suitable way to address these issues.
It’s high time we roll up our sleeves and expose the hidden layers of decay within NNPCL that have been cleverly disguised with a shiny new logo and a revamped identity. However, in my opinion, trying to sell off NNPC assets is like slapping a Band-Aid on a broken arm – it’s just a distraction from the real problems that the National Oil Company is facing.
Despite being a Federation-owned corporation, essentially meaning, owned by every citizen of the Federal Republic of Nigeria, NNPCL has been remarkably secretive with its information. Citizens are left relying on word-of-mouth from NNPCL representatives to gather any insights into the financial well-being of the corporation. As an illustration, the GCEO of NNPCL, Mele Kyari, mentioned that the corporation spent $10 billion on subsidy payments in 2022. However, there is no documented evidence to support this claim, which leaves citizens unaware of this significant expenditure made by a corporation they collectively own.
Among oil companies owned by oil-producing nations globally, NNPCL is considered quite ironic. Surprisingly, the company managed to declare a profit in its operations in 2020, marking the first time since 1976. With the size and assets of NNPCL, one can only describe it as a prime example of “how not to run a company.”
Also Read: Adoption of Energy Transition Is Inevitable – NUPRC Boss Informs Oil Producers
In recent years, NNPCL has shown signs of progress. The company released its audited financial statements for three years (2015-2018) in 2019. Furthermore, NNPCL achieved profits in 2020, and in 2022, it announced a substantial profit of N674 billion for 2021. The government has an opportunity to capitalize on the ongoing progress, transform NNPCL into a profit-oriented entity, and pursue the goal of making it a publicly-traded company. This transition would elevate the corporate governance of NNPCL to a higher standard.
