“July 19 should go down as a special moment in the economic history of Nigeria,” wrote Premium Times columnist Reuben Abati. On that day, nearly a year after Nigeria’s long-awaited Petroleum Industry Bill became law, providing the legal framework for the selling of shares, the Nigerian National Petroleum Corporation finally became a private company – the Nigerian National Petroleum Company Ltd.
The former state-owned company, known for its relatively poor leadership and lack of profits for some 45 years, will now be independent of government and operate without state funding, with the new goal of delivering value to its shareholders.
NNPC’s shares and assets, including oil blocs and refineries, are now held by the ministries of petroleum and finance.
‘‘We are transforming our petroleum industry, to strengthen its capacity and market relevance for the present and future global energy priorities,” said President Muhammadu Buhari at the unveiling of NNPC Ltd at the State House Conference Centre in Abuja.
By transitioning from a corporation to a limited liability company, the NNPC becomes Africa’s largest and potentially most profitable company, according to NNPC CEO Mele Kyari.
“We know for sure that the [potential profits] of this company are beyond N287bn [$692m]. And we have seen the progress, and we know that it is possible to scale this up.”
The Nigerian government is confident that the new entity, which operates joint production ventures with oil majors, including Shell, Total, ExxonMobil, Chevron and Eni, will attract more foreign investment and operate as a profitable entity that will declare dividends.
But oil and gas revenue in Nigeria came in at N1.23 trillion between January and April, far below a projected N3.13 trillion. In addition, Nigeria has failed to meet its OPEC quota for the first four months of this year as oil output averaged 1.32m barrels per day instead of 1.8 million, according to finance minister Zainab Ahmed.
To resolve the poor performance of oil production in Nigeria, the new NNPC Ltd will “act quickly, borrow money quickly and return people’s money quickly and can also make decisions quickly,” said Kyari.
The limited company is also hoping to launch an initial public offering (IPO) by the middle of next year.
An IPO will enable the diversification of the shareholder base to include institutional and retail investors rather than just the federal government.
Kyari stated that the privatisation of NNPC will foster energy security in Nigeria as an expansion plan to grow its fuel retail presence from 547 to over 1500 outlets within the next six months has been made.
New company faces many challenges
NNPC Ltd arrives at a time when fuel prices in Nigeria have risen by 3.4% in six months. Recently, and although Nigeria is Africa’s biggest oil producer, the pump price of premium motor spirit was increased to N179 ($0.42) per litre, provoking widespread dismay.
The Lagos state chairman of the Nigeria Labour Congress (NLC) has condemned the increase in fuel prices and said this was due to the failure of the government to repair the existing refineries.
The disrepair of the refineries along with oil theft and pipeline vandalism continue to hinder oil and gas revenue performance in Nigeria and oblige the country to import most of its refined products.
“For the first seven months of 2022 so far, from our records, 12.3 million metric tons of PMS have been imported,” said the chief of naval staff and vice admiral Anwar Gambo at a hearing of the House of Representatives.
As Nigeria is forced to import most of its refined products, fuel subsidies have become extremely high in recent years. According to a report by SBM Intelligence, the cost of fuel subsidies increased by 890% between 2017 and 2021.
In addition, the Russia-Ukraine war recently led the federal government to earmark the sum of N6.72 trillion for payment of fuel subsidies in the 2023 budget.
Faced with the expectation of fixing Nigeria’s refining capacity and lowering the country’s fuel imports, as well as making a profit for its new shareholders, the new company therefore starts life with many challenges to overcome.