Seven NNPC’S subsidiaries made a cumulative loss of N352bn in 2018
It’s meant to be a cash cow in first half of 2018 due to favourable oil prices, the reverse is the case as the state oil company of Africa’s biggest producer is bleeding money as its state subsidiaries continues to wallow in inefficiency and wastefulness.
Nigeria is dependent on oil for about two-thirds of state revenues and is among the countries worst affected by the plunge in International crude prices to below $30 a barrel in January — a level last seen in 2003.
A cursory review of 2018 NNPC’S financial reveals seven subsidiaries such as Corporate Head Quarters (CHQ), Port Harcourt Refining Company (PHRC), Warri Refining Petrochemical Company (WRPC), Kaduna Refining Petrochemical Company (KRPC), Shipping and Nigeria Pipeline Storage Company Limited (NPSC) made a cumulative loss of N352billon.
The lion share of the loss was incurred by the Corporate Headquarters ( CHQ) with an N158.7billion loss while Nigerian Petroleum Development Company Ltd (NPDC) emerged as a shining star in 2018 financial year with N301.88billion profits followed by Nigerian Gas Company
with N58.6billion and Pipelines and Products Marketing Company (PPMC) with N36.1 billion profits.
“These are basically the medium which lots of funds are stolen as they are basically used by government to do political patronage,” Adeoluwa Eweje, an International Energy Solution Consultant told Businessday.
NNPC has struggled to keep the poorly-maintained state-owned oil refineries operating profitably with very little luck; in 2018 financial year these refineries in Kaduna, Port Harcourt and Warri incurred a cumulative loss of N126.2billion in 2018. They also had cumulative capacity utilization 8.27percent in the year under review.
In 2018, NNPC spent N140.57billion on pipeline maintenance which was a 8.24percent increase compared to 2017 expenditure of N129.87 billion while the number of Pipeline breaks soared by82.86 percent to 2,048 break points from 1,120 break points in 2017.
According to Fixouroil an arm of Budgit a civic organization that applies technology to intersect citizen engagement with institutional improvement, to facilitate societal change the Year-on-year increase in pipeline breaks from 2017 was largely due to increased pipeline breaks at Mosimi as the number of pipeline breaks points in Mosimi area increased from 17 in January 2018 to 216 in 2018.
“Mosimi area accounted for as high as 84percent of all pipeline breaks in December 2018,” FixOuroil said.
Fixouroil noted that an important driver of pipeline breaks is the illegal refineries; there are at least 500 artisanal refinery camps in Niger Delta refining approximately 37,500 barrels of crude oil per day.
“These refineries and purchase their crude oil from the black market who ultimately get it breaking pipelines as cannot buy crude oil formally,” Fixouroil said.
Further, drilling reveals the biggest expenditure uptick amongst NNPC’S subsidiaries in 2018 occurred with Nigeria Gas Marketing Company whose expenditure increased by 824.02 percent from N20.1 billion to N186.3 billion.
Also, NNPC’S group 2018 expenditure increased by 28.75percent from N3.78trillion initially budgeted to N4.87trillion actual expenditure representing an N1.09trillion surge from its budgeted amount.
NNPC’S Kaduna Refining and Petrochemical Company (KRPC) subsidiary was the poorest in the year 2018 - experiencing a negative deviation of -98percent from an initial revenue projection of N321.6billion to actual revenue generated of N4.36billion.
NNPC’S CHQ and Ventures had the 2nd and 3rd highest negative revenue deviations with -98.58percent and -91.62percent from their initial projection, with NNPC’S CHQ making just N2.42billion as against N170.6billion revenue initially projected and Ventures earning N13.21billion as against N37.56billion projected in its 2018 budget.
Also in 2018, the sum of N2.8billion was recorded as crude oil losses from proceeds from domestic crude sales in addition to a further N25billion deducted for product losses before remitting to FAAC while another N730.85bn was also deducted from proceeds from domestic crude sales to cover losses incurred due to under recovery (petrol subsidy), representing a 405.8percent increase from the N144.5billion paid for under recovery in 2018.
Buhari had in 2015 promised to stop NNPC from falling back into bad habits by transforming Nigeria’s national oil company into a cost-effective, profit-driven and transparent institution; however data from NNPC reveals the perennial challenges confronting the organization still remain the same.
“We hope the Petroleum Industry Bill (PIB) will reduce or better still eliminate some of the huge transactions costs the NNPC currently bear,” National Petroleum Professorial Chair in Oil and Gas Economics at University of Cape Coast’s Institute for Oil and Gas Studies, Ghana, Wumi Iledare said.