Brief History of The Nigerian National Petroleum Corporation
In the early 1980s, I started work as a National Youth Service Corps (NYSC) member at the Falomo, Lagos headquarters of the Nigerian National Petroleum Corporation (NNPC), having been earlier recruited at an interview overseas. Brandishing a freshly minted post graduate degree in engineering, I was quite glad to come home to serve my country which paid for my search for the Golden Fleece.. As I ascended the stairs of the rather shabby headquarters building of the National Oil Company (NOC) of Nigeria, Africa’s largest crude oil producer and OPEC kingpin, I knew something was amiss. How could this shabby building, alive with noisy humanity be the head office of the NNPC? Alas, it was and I instinctively knew that by accepting to work in this place, I may have made a grave career mistake. However, as an altruistic young man, ready to learn and help grow his country, I decided to weather the storm and forge ahead like most of the other engineers I saw milling listlessly in overcrowded offices. It did not take much to realize that this was a dysfunctional organization peopled by the best brains the country had produced. The irony of this situation is that it subsisted for the next several decades and till this day.
Sometime in the next year, having been fully absorbed into the Corporation after completing the mandatory one year NYSC service( I was below 30 and therefore had to do the NYSC before I could be absorbed even though I had a letter of employment), I fortuitously accompanied the top brass of NNPC to a meeting with the Presidential Adviser on Petroleum Matters, Alhaji Yahaya Dikko at the dingy offices of the Federal Ministry of Petroleum Resources, located at the dysfunctional Federal Secretariat in Ikoyi. What transpired at that meeting wounded my young soul and made me take a difficult decision a few years later.
At the meeting with Dikko, the NNPC top brass comprising the then General Managers( equivalent of the current Executive Directors) and the Acting Managing Director , informed Dikko that NNPC was returning about $250 million unspent budget for the previous operational year. Dikko was livid. He asked the delegation why they had to return unspent money, when NNPC had no new development projects - refineries, petrochemical plants, Liquefied Natural Gas (LNG) etc. He was obviously disappointed with these people who had no idea of what to do with money, no investment culture . I was shocked that these were my mentors and that my future will be determined by these obviously under equipped men, who had been entrusted with the economic backbone of the country. They left Dikko’s office thoroughly perplexed , but I was not, because I was on the same page with Dikko ( May his soul rest in peace). Having interacted with officials ofADNOC(Abu Dhabi), NIOC (Iran), PDVSA (Venezuela ), Per tami na( Indonesia) and Petronas (Malaysia) ,I was quite disappointed to see that the leaders of NNPC were not the entrepreneurial type and on further enquiry the reason for this state of affairs dawned on me.
All these Executive Directors of NNPC, including the CEO, were physics graduates of the University of Ibadan. Physics graduate civil servants were hired to set up the NNPC in a country awash with engineers and earth sciences graduates and experts . No wonder Dikko had to teach them business.
In the early 1990s, a short-tenured Petroleum Minister, in order to ingratiate himself with the military dictator of the time, revealed to the dictator, the fact of a horde of cash in excess of 1 billion dollars in the coffers of NNPC. The grateful dictator promptly “borrowed” about $800 million from this stash of cash and that was the beginning of the end of financial independence of NNPC and it’s uncontrolled descent to the current sorry pass. The dictator’s “loan” ended the financial independence of NNPC, but one is constrained to ask why an Organisation with very few assets at the time ,was sitting on a hoard of cash which attracted the interest of the rapacious military regimes like bees to honey. The management of NNPC had always been challenged to emulate their Asian, South American and Arab counterparts. Unfortunately, it appears that they did not have the mettle for this challenge and failed woefully in their role as the guardians of the national hydrocarbon resources.
The disaster that NNPC has become started in 1972, when a physicist was preferred to an engineer, as CEO, at the inception of the Nigerian National Oil Company(NNOC) , the precursor to the NNPC, because of the post civil war politics of war booty and the divine right of the victorious soldiers of the Nigerian army. Engineer Odor, a Kalabari citizen of Rivers State , appointed by General Yakubu Gowon as the first Managing Director of NNOC, was brushed aside by the booty politics of the Supreme Military Council and instead, an Ibadan-trained physicist in the person of Chief. Festus Marinho, a favoured son of the times, was appointed to replace him, a few weeks after he was named the Managing Director. This sad situation of injustice and dysfunction heralded the birth of NNOC/NNPC and the Corporation has not recovered till this day. In 1977, the NNPC was fully incorporated by the merger of the Directorate Division of the Ministry of Mines and Steel and the NNOC.
Since the foregoing inauspicious beginning, the NNPC has staggered from one unfortunate scandal to another; from the N2.8 billion scandal ( when the Naira was worth nearly $2) to the Strategic Reserves, Bunkering, Halliburton, Willbross and more recently the serial subsidy and “missing money” scandals. The trouble with NNPC is the trouble with Nigeria, pure and simple. The Corporation has always been run like Nigeria is run and has ended up like Nigeria, a perennially underachieving business.
Whenever I hear people comparing the NNPC with other National Oil Companies, I can’t help but wonder about the naïveté of the Nigerian, either as a commentator or journalist. Apeople get the National Oil Company that they deserve, just as they get the leaders and politicians that they deserve. The trouble with the perennially underachieving NNPC is that the rapacious politicians and their comprador allies in the “private sector”( there is really no such a thing as the private sector in Nigeria, as everybody is feeding off the oil revenue streams using rentier enterprises) cannot let the Corporation be.
The former Minister of Petroleum Resources , OPEC chairman and nowAmayanabo of Twon Brass, Dr Edmund Daukoru, once wondered at a meeting of the Group Executive Committee of NNPC , why Nigerian politicians, unlike their counterparts in other oil producing countries, do not allow their National Oil Company (NOC) operational independence, which will enhance the economic prospects of both the Corporation and the nation at large. According to the bewildered Daukoru, who himself was earlier indicted for corruption with Funso Kupolokun, a former Group Executive Director and later Group Managing Director of NNPC , the politicians in Indonesia, Malaysia, Brazil, Venezuela etc., allow their NOC independence unlike the Nigerian situation where NNPC is the President’s and politicians’ source of slush funds.
It is ironic that in spite of the terrible years of the Red Terror in Ethiopia, under the brutal regime of Colonel Mengistu Haile Mariam , the national airline, Ethiopian Airlines , was given total operational and financial independence by the dictator and even his successors till this day. Is it then any wonder that Ethiopian Airlines is Africa’s premier airline while Nigeria Airways, Air Nigeria etc have since become historical relics. NNPC is therefore on the road to becoming the petroleum industry equivalent of Nigeria Airways, Air Nigeria, Nigerian National Shipping Lines etc unless a long- delayed rescue mission is devised by the Nigerian people (not the politicians).
NNPC is the only NOC still involved in Joint-Venture contracts production regime with International Oil Companies such as Shell, Chevron Texaco, Total and ExxonMobil. All other major NOCs have since graduated to running their NOCs as pseudo private Corporations, hence the business successes of Petrobras (Brazil), Pertamina (Indonesia), Petronas( Malaysia), PDVSA (Venezuela) and even the newcomer Sonangol of Angola which was set up a little more than a decade ago, after the devastating Angolan civil war.
Sonangol has operating concessions in Brazil, Iraqi Kurdistan and even Nigeria, but NNPC does not exist outside of Nigeria after 40 years of existence!! This is a crying shame for a pioneer of the petroleum business on the African continent. Even little EGPetrol of Equatorial Guinea is rated ahead of NNPC in management and business culture . How low can you get as a Corporation?
An interesting result of this state of affairs, is the fact that while Petronas of Malaysia has a global staff strength of over 150,000 on the basis of the production of 600,000 barrels per day of oil in Malaysia alone and Liquefied Natural Gas and a myriad of global business ventures, NNPC which manages the production of over 2.7 million barrels per day in Nigeria only and also has an LNG business, only has a staff strength of below 10,000 in total.
The inability to progress the Joint Venture Agreements to a more nationalistic and entrepreneurial arrangement is the result of the economic rentseeking mentality of the Nigerian operators of the oil and gas business and the low business intellect of successive NNPC management. The Joint Venture Arrangements entered into in the 1970s allows NNPC to operate the Joint Ventures after about 20 years , but till date NNPC has made no effort to operate any of the the Joint Ventures, even though it operates it’s wholly-owned upstream company , the NPDC, however, with very limited efficiency, due again to political interference.
Local Sole Risk producers( most of whom received NPDC assets and reserves as gifts from the military dictator Babangida), wholly owned and managed by Nigerians, have been reasonably successful in the running of the upstream business with examples of Seplat of Austin Avuru and ABC Orjiako, Consolidated Oil of Mike Adenuga, the marginal fields producers etc., so why is it difficult for the 40 year old NNPC to run the 2.8 million barrels per day Joint ventures operations? The reason is embedded in a lack of political will, ambition and hedonistic rent- seeking behavior of Government and the intellectually challenged management of NNPC.
NNPC’s past and present woes derive from a mixture of continuos and debilitating Government interference and a non entrepreneurial management with a servile political and business culture. There is a saying that nobody gives you power, you grab it if you want it badly. NNPC management has most of the time been filled with political CEOs who are grateful to be appointed to the position and will never rock the boat or have an opinion that will upset the Minister or President.
Unlike his counterparts in other NOCs who have security of tenure, the Group Managing Director of NNPC can be sacked with ignominy and impunity, and in reality owes his position to the whims and caprices of either the Minister of Petroleum or the President. However, no NNPC CEO has dared rock the boat even when it is obvious that compliance and genuflection to the powers -that -be cannot guarantee survival. The bottom line is that NNPC GMDs have almost always been wimps, not deserving of the exalted office of the CEO of the the biggest oil producing company on the African continent. The result of all this is a torpid organization, where form takes precedence over substance and there is an inverse relationship between effort and reward.
This situation has gotten so bad that in recent times, a particularly servile GMD of NNPC has been photographed carrying the hand bag of a female Minister at a foreign airport , helping to arrange the Minister’s birthday party and genuflecting before a former GMD at a public function. How can such a CEO do anything useful to lift the fortunes of the Corporation? How can he afford to surround himself with the best people who can drive a positive development agenda for the Corporation?
The current subsidy and missing funds public relations disaster has further exposed the near absence of intellectual capital in the Corporation. It is so easy to explain the subsidy issue and the “missing “funds , because NNPC here is a victim being painted as the villain. However, the poor quality management of the Corporation have found the simple task to be very daunting and have instead preferred to dabble in the dangerous and banal waters of Nigerian politics.
As a former NNPC insider and veteran of battles with the rent-seeking cabals in the National Assembly, I am aware that NNPC is mostly innocent of the accusations against it, as perhaps, the result of the forensic audit has shown , but the Corporation needs an intellectually articulate and confident management to take on the rapacious wolves in the National Assembly and the doubting, perhaps envious public (why is NNPC the preferred choice of almost all job seekers ?). It is really a simple matter, but you can’t give what you don’t have. That is a basic principle in law and in life also, and unfortunately, the people who ran and are running NNPC did not and still do not have much to give. That is the Nigerian tragedy!!!!
Epilogue
In 2015, under the APC Government, enter Dr Ibe Emmanuel Kachikwu, as the new GMD of NNPC. Suave, well educated and experienced in the legal aspects and murky politics of the Nigerian oil industry, and formerly Executive Vice President of ExxonMobil Africa, he exudes confidence, panache and intellect. However, like all the past GMDs of NNPC, he was appointed by a political and interfering President, who to make matters worse, also doubles as the Petroleum Minister, on the strength of previous disastrous stints in the petroleum industry. Kachikwu is a good showman, but the petroleum industry is not run successfully by showmen. There is a long way between Hollywood and the oil patches of Texas and Oklahoma, between the mirage of the opulent NNPC Towers in Abuja and the reality of the dying Oredo and Oziengbe fields in Edo State. One deals in dreams and fantasies, while the other always has to confront reality. Perception is reality, and reality drives perception.
This week, Kachikwu, who doubles as the Minister of State for Petroleum Resources, a patent illegality under the Petroleum Act, finally announced the long expected (over three decades) and perpetually postponed restructuring of the NNPC behemoth into 5 major businesses and 30 subsidiaries. This is good news for the beleaguered petroleum sector, but since the NNPC is still under the total control of Government, this restructuring will remain cosmetic, even if it is, admittedly, a step forward. The real potential of the petroleum industry will be unleashed when these businesses are partially or totally privatised like the Great Leap Forward in the telecommunications and power sectors. However, looking at the antecedents of the powers- that- be and Nigeria’s sociopolitical and economic realities, this coming restructuring may not be worth the paper on which it is printed. The new President is an unrepentant advocate of the command and control economy and does not hide his aversion to the free market and attendant deregulation and privatisation.
Who will appoint the management and staff of these emerging entities? Obviously the Government; so we can forget efficiency and quality and key in Nepotism, Federal Character (read quota system) and sundry stereotypes . However, this is still a step in the right direction, but show business, petroleum law and IOC experience will not help Kachikwu in his new endeavour and the President, like the proverbial leopard, will never change his political and economic philosophy spots. So, the beat goes on? Perhaps the emerging economic depression will encourage a change of direction? Fingers crossed.