TheCable

The weeks before July 19, 2022, bore signs of rejuvenation for Nigeria’s energy landscape. The message of “a new dawn” was palpable. The logo of the Nigerian National Petroleum Company Corporation (NNPC) was yanked off from all its petrol outlets in preparation for a rebirth that is expected to reposition the company to deliver “energy for today, and energy for tomorrow”.

The energy ecosystem leapt for joy at the knell of the news like the foetus of John The Baptist when it encountered Jesus in the biblical tale of Mary and Elizabeth.

The excitement was hinged on the transformation of NNPC into a commercial venture that would strengthen the capacity and market relevance of Nigeria’s oil industry.

Following the unveiling of the Nigerian National Petroleum Company Limited (NNPC) Limited by President Muhammadu Buhari, TheCable looks at key highlights of the new enterprise.

A CHILD OF PIA

The migration to a limited liability company followed the provision of the Petroleum Industry Act (PIA). Given the many obstacles clogging the defunct Nigerian National Petroleum Corporation (NNPC), stakeholders clamoured for reforms to induce profitability, transparency and overall development.

Hence the signing of the PIA in 2021. Section 53(1) of PIA 2021 requires the minister of petroleum resources to cause the incorporation of the NNPC Limited within six months of the enactment of the PIA in consultation with the minister of finance on the nominal shares of the company.

In September 2021, the Corporate Affairs Commission (CAC) completed the incorporation of the NNPC.

LIMITED GOVERNMENT CONTROL

What is also new with the transition is that the government will no longer have control over the staffing of the NNPC. 

NNPC Limited will operate “free from institutional regulations, such as the treasury single account, public procurement, and fiscal responsibility act,” Buhari said at the unveiling of the company. 

Section 53 (5) of the Act stipulates that shares of the company held by the government are not transferable or mortgaged unless approved by the government and national economic council.

It further stated that by way of securitisation, any sale or transfer of shares of NNPC Limited shall be at a fair market value and subject to an open, transparent and competitive bidding process.

The sale or transfer of the shares shall be on an equal proportion basis of shares held by the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated.

MORE FOCUS ON BUSINESS, NOT REGULATORY MATTERS

Just hours before the unveiling of NNPC Limited, media reports said the defunct NNPC had increased the petrol pump prices. The development highlights the role the former corporation played in controlling pump prices over the years.

But not anymore — with NNPC Limited coming on board. Mele Kyari, then group managing director, NNPC, said the new company would not concern itself with issues of price determination, subsidy and the ilk.

“In the case of the price of petroleum, this is a policy matter. And the NNPC is going to be a supplier to the federation at a fee. So, the issue of at what price you sell petroleum will be the decision of the state,” Kyari had said.

“It has nothing to do with our operations. For us, what it means is that this is business for us. We will charge a fee at any point so that the company can make money on behalf of its shareholders.”

CAPITALISATION OF NNPC LIMITED

Sector 54(9) provides that the initial capitalisation of NNPC Limited will not be less than its financial requirements to effectively discharge its commercial duties and deal with its obligations and liabilities transferred to it.

NO MORE GOVERNMENT FUNDING

Following the transition of the NNPC to a commercial entity, it is believed the federal government would put an end to funding the oil firm’s projects as was obtainable since it was established in 1977.

The PIA also mandates NNPC Limited to conduct its affairs on a commercial basis in line with the Companies and Allied Matters Act. According to the law, the company will run on a commercial basis in a profitable and efficient manner without recourse to government funds. It shall declare dividends to shareholders and retain 20 percent of profits as retained earnings to grow its business.

In an interview aired on Channels TV on Monday, Kyari said the national assembly would no longer need to pass the appropriation for the purpose of its contribution to the joint ventures, cash calls, and all other obligations in the various business agreements.

“What that means is that the NNPC must now look for financing without recourse to the state. And indeed, the law is very, very clear that we will have no recourse to public funds,” he said.

Before the official transition, the oil firm had secured a number of funding commitments from investors.

In November 2021, the African Export-Import Bank (Afreximbank) signed a $1.04 billion deal with the NNPC to boost oil output.

In January 2021, the oil firm also secured a $5 billion funding commitment from Afreximbank to fund major investments in Nigeria’s upstream sector.

Now, it is expected that the company will seal more deals, and enhance investors’ relationships, among others, to keep NNPC Limited on the right track.

NO LONGER BUSINESS AS USUAL

With NNPC Limited, it is no longer business as usual for the management and board of the company.

Apart from profit-seeking, NNPC Limited is expected to operate above board by mandatorily making disclosures for every financial year.

TheCable had reported that Kyari said the transition would heighten demand for transparency.

FUTURE OF NNPC LIMITED 

Like Saudi Aramco, its Saudi Arabian counterpart, it is expected that NNPC Limited may decide to go public later in future.

Saudi Aramco went public in December 2019 — the biggest IPO at the time – after raising a record $25.6 billion by selling three billion shares, amounting to 1.5 percent of the company’s value.

Kyari had earlier disclosed that there are plans to hold an IPO for NNPC Limited by June 2023.

“We’re already on the positive trend, and by the middle of next year, I’m very, very confident that this company will be in a place to say we’re ready for IPO, and it will be the decision of the nation to go private completely in the sense that we can now sell their equity, which is different from being owned by the generality of Nigerians,” he said.

Reporting by Desmond Okon and Bunmi Aduloju