Initial Comments on NNPCL’s 2022 Audited Accounts
NNPC Limited, Nigeria’s national oil company, released its 2022 audited financial statement late Thursday. The audited statement covered a 16-month period, extending to four months in 2021, presumably to account for when the corporation transmuted to a limited liability company. Notably, NNPCL has now released five consecutive audited reports, covering 2018 to 2022.
The current GCEO of the company, Mr. Mele Kyari, blazed this path of openness when in 2020 he promised to open up the books of the organisation. He kept the promise. That year alone, NNPC released the 2018 and the 2019 audited financial statements in June and October respectively. The 2022 report should have been released last year going by the tradition established by NNPC in subsequent years. But better late than never. Besides, it is conceivable that the delay could have been occasioned by the dissolution of the organisation’s board.
Prior to 2020, the public was denied complete access to the financial state of NNPC. Kyari, who often states—and correctly too—that the national oil company belongs to all Nigerians, began the process of steering the organisation towards the path of light. He and his team deserve ample praises for starting and sustaining this desirable regime of transparency.
However, NNPCL could do much better with the level and the quality of its disclosures. Of late, the company seems to be relapsing to its opaque past. In 2016, two administrations before Kyari’s, the company started publishing monthly financial and operational reports. These reports provided near real-time and detailed picture of the organisation and the oil and gas sector. The last NNPC’s monthly financial and operational report published was for July 2021.
Also, the 111-page financial statement released on Thursday by NNPCL is not as detailed as it would appear or as it should be expected. For the 2021 financial year, the company released 21 separate audited financial reports. The current consolidated report lumps all parts of the organisation together. Without audited reports of all the subsidiaries, it will be difficult to know how the different components of the company are faring. And without an operational report alongside the financial statement, it is hard to really assess the performance of the national oil company. Additionally, a company with $20.4 billion annual revenue can surely do much better than just posting scanned copies of its audited accounts on its website.
As a national company and as an EITI supportingcompany, NNPCL should be disclosing more than it used to do, not less. It is simply unacceptable to go from 21 financial statements all posted at once in 2021 to one statement in 2022. Also, NNPCL’s disclosures need to be more timely and more comprehensive and need to be presented in a more engaging manner. Petronas is the national oil company of Malaysia, and it is owned 100% by the government like our NNPCL. But the level, frequency and presentation of Petronas’ financial statements dim NNPCL’s and should put us to collective shame.
However, there are more fundamental issues peeking out of the audited statement that NNPCL posted on Thursday. I will touch on three for now.
The first issue is how poorly performing NNPCL still is in both absolute and comparative terms. According to the financial statement, NNPCL recorded an operating profit of N694.29 billion (or $1.61 billion), a total revenue of N8.82 trillion (or $20.44 billion) and had total assets of N58.65 trillion (or $136 billion). That is an operating margin of 7.8% and an asset turnover ratio of 14.7%. Both indicators show that NNPCL was, financially, not in fine fettle.
Petronas, Qatar Energy, Petrobras and SaudiAramco are NNPCL’s comparators. They are all national oil companies; and like NNPCL, they are fully integrated companies and are strategically important for the energy security of their countries. Only two of them are listed: Petrobras of Brazil and Saudi Aramco, which is 98% by government and government entities. Petronas of Malaysia and Qatar Energy of Qatar are still 100% government-owned.
In 2022, Petronas recorded operating profit of $31 billion, revenue of $75 billion, and had assets of $162 billion, which translated to operating margin of 40.89% and asset turnover ratio of 46.29%. On its part, Qatar Energy secured $26.7 billion in operating profit and $53.8 billion in revenue with total assets of $162 billion, amounting to 49.63% operating margin and asset turnover ratio of 33.20%.
Petrobras had $57 billion in operating profit, $124 billion in revenue and assets of $187 billion, which amounted to 45.96% in operating margin and 66.31% in asset turnover ratio. In the same year, Saudi Aramco got $305.09 billion in operating profit from a revenue of $604.37 billion and assets of $664.78 billion. This meant 50.48% operating margin and 90.91% asset turnover ratio.
In sum, these four comparators recorded operating margins of 40-54% (compared to NNPCL’s 7.8%) and asset turnover ratio of 33-91% (compared to NNPCL’s 14.7%). The trend is the same for most national oil companies. These national oil companies are surely sweating their assets. Not NNPCL.
Another data point that puts NNPCL’s continued