Removing the Veil from NNPC’s Operations
pivotal to the Nigerian economy as the government still largely depends on revenue from oil to finance its budgets.
“Over the years, BudgIT has consistently requested that the NNPC should make its audited report available to citizens in addition to publishing its monthly financial and operations reports, to further ensure transparency and accountability,” the body said.
In countries where the release of audited financial statements of publicly owned enterprises are routine, these things are taken for granted. However, it took over four decades and dozens of GMDs at the corporation to get it done.
Nigerians had yet to fully recover from the ‘shock’ of that historic move when on Thursday, the corporation published its second audited financial statement, the one for 2019.
Though not fully out of the woods yet, the new report looked like a major improvement on the one released five months earlier, with the corporation achieving a 99.7 per cent reduction in its loss profile from a whopping N803 billion in 2018 to N1.7 billion in 2019.
Although a number of the corporation’s over 20 subsidiaries recorded losses, the general administrative expenses of the national oil company, witnessed a 22 per cent decrease from N894 billion in 2018 to N696 billion in 2019.
But some of the national oil company’s subsidiaries which posted improved performances included the Nigerian Petroleum Development Company Limited (NPDC) which recorded N479 billion profit in 2019 compared to N179 billion in 2018, representing a 167 per cent increase.
By far, the most lucrative income came from the corporation’s National Petroleum Investment Management Services( NAP I MS ), which rose from 75 per cent to N2.83 trillion from N1.2 billion the previous year.
In addition, the Integrated Data Sciences Limited (IDSL) recorded aN 23 billion profit in 2019 compared to N154 million in 2018 , representing over 14,966 per cent increase while the Petroleum Products Marketing Company (PPMC) recorded N 14.2 billion profit in 2019 compared to N 9.3 billion in 2018, representing 52 per cent increase.
The PPMC accounts were audited by KPMG Professional Services and Paul A kin ad eA deb impe & Co, and as at December 31, 2019, its revenue stood at N32.5 billion compared to N29.5 billion. It’s profit before tax was N14.7 billion compared to N9.5 billion in 2018, while the subsidiary paid N163m in taxes in 2019 as against N158m in 2018.
The Nigerian Gas Company Limited (NGC) had its total asset increase from N221 billion to N361 billion , representing about 63 per cent rise in the company’s asset base.
In the same vein, NNPC Retail limited, a subsidiary established in 2002, recorded a profit after tax of N2.6 billion as against N1.9 in 2018. Among others, the company is engaged in the sale of refined products in the filling stations run by the corporation.
Aside the Wheel Insurance Limited , which recorded a loss, as its total comprehensive income for the year fell from $18.1m in 2018 to $7.3 in 2019, as expected , the Port Harcourt Refining Company (PHRC) also posted a loss before taxation of N46 billion, higher than the 45 billion recorded in 2018, but a total comprehensive loss of N50 billion in the year under review.
The story wasn’t different for the Warri Refining and Petrochemical Company Limited (WRPC) which made a loss before tax of N49.2 billion against N44.4 in 2018.
All the country’s refineries are currently nonfunctional and are either undergoing rehabilitation or negotiations for public private arrangement for their revamp.
The Chief Financial Officer( CF O) of the corporation, Mr. Umar Ajiya, said that the release of the 2019 AFS was in keeping with the management’s commitment to transparency and accountability and inconsonance with the principles of the Ex tractive Industries Transparency Initiative (EITI) of which it is a partner.
The corporation explained that the improved performance in the 2019 financial year was driven mainly by co stop timi sat ion, contracts re negotiation and operational efficiency.
“The 2019 AFS goes further to demonstrate our unwavering commitment to the principle of Transparency, Accountability and Performance Excellence (TAPE) while the outlook for 2020 looks promising in view of the management’s strong drive to prune down running cost and grow revenues,” said the organisation.
Aside that, in a further effort to pull off the toga of opacity, the corporation announced in August that it had officially become an Extract ive Industries
Transparency Initiative (EITI) partner company, as part of its push for greater accountability in the corporation’s operations.
With the move, the national oil company joined a group of over 65 extract ive companies, state-owned enterprises (SOEs), commodity traders, financial institutions and industry partners who commit to observing the EITI’s supporting company expectations.
The new status now requires the NNPC to publicly declare support for the EITI principles by promoting transparency throughout the extractive industries, help public debate and provide opportunities for sustainable development.
It also means that the corporation will now publicly disclose taxes and payments, ensure comprehensive disclosure of taxes and payments made to all EITI implementing countries and publicly disclose beneficial owners.
The initiative will further see the corporation engage in rigorous procurement processes, including due diligence in respect to partners and vendors, among others.
Era of Opaqueness Gone
Kyari has also been talking about why the corporation has now opened up its books, reiterating that the national oil company was no longer scared of being scrutinised by the public.
“I have said it times without number that the NNPC is never afraid of any scrutiny. We will continue to play our strategic role as a key enabler of Nigeria’s economy.
“Our commitment toward entrenching Transparency, Accountability and best-in-class Performance Excellence (TAPE) in all our operations is still unshakeable. Since coming on board, we have been very open in our dealings with all our partners and stakeholders.
“From the unprecedented publication of our Audited Financial Statements and monthly financial and operational reports to crude term contracts and several other bids and contracting processes. We are not relenting until this great corporation attains global excellence,” he stated.
Kyari posited that anything that happens in the oil and gas industry has a very direct impact on the economy and the country as a whole, adding that it is the reason conversation around oil and gas is critical.
According to the NNPCGMD, given the pivot al role the NNPC plays in the Nigeria economy, the new current leadership of the corporation cannot afford to operate in the past.
“When you look at the oil and gas sector, what it did for this country in the last 30,40 years, enormous resources have been obtained from the industry leading to the development you see around us.
“Also, the GDP numbers , the oil and gas industry may be contributing less, but in terms of the resources available to the states, it’s of course a rich source.
“The oil and gas industry in resource dependent countries always engineers growth and is an enabler of industry.
“The sector has s huge role to play . It is doing that.And we all know that the only industries that are efficient and cost-efficient especially and abide by some form of transparency and accountability can survive the next 30 to 40 years,” he stated.
The NNPC boss also gave a hint on how he has been able to do things hitherto regarded as impossible in the past, adding that the government at the federal level has also been of assistance with its policy of non-interference.
“I think I have an advantage that posterity has thrown at me which is that we have a political leadership that doesn’t interfere with what we do today.
“We are now responsible for our decisions and our balance sheet. Many of the things that you are aware happened in the past, do not happen today.
“Therefore, we are now more focused, more business oriented. We feel more accountable. Therefore, the combined result of that is a company that can drive itself and act like any other world-class company.
“What’s different is a leadership that has a consensus that this company must change and must deliver to shareholders, including you. Because that freedom is there, we have a very active and informed board.
“We have delivered on everything we said we will do. More importantly, this must come into perspective. When a company doesn’t tell what it does to shareholders, there’s a problem. A company must have its accounts.
“Inthelast43years,nobodycaredaboutaccountability to shareholders. We were always scared of making it available to shareholders, but we have done the books and going forward, this company will transit to one that is a new positive force.
“Wearenotafraidofputtingthatonthetableand we have very good feedback from our shareholders. The combination of that is making us look different” he enthused.
The group and its subsidiaries also note that they are continuing the search towards attaining a $10 unit operating cost per barrel target, with more transparent operational processes.
Beyond the Financials
The corporation also appears to be pursuing accountability in some other spheres , seeing that the group has to be driven as a whole.
In one of such events done in the public glare last Thursday, at least 339 crude oil trading companies applied for the sale and purchase of Nigerian crude oil grades contracts spanning 2020 to 2022 by the close of the bidding process.
Last month, the country’s hydrocarbon company, invited interested and credible companies to participate in the open tender.
While declaring the bid process closed during the event which was partly virtual and partly physical, the NNPC team said the transparency and credibility of the process was of paramount importance.
The corporation stated that it would ensure that the best will emerge in the entire process, stating that it would adhere with the public procurement act and other relevant laws in coming up with the final winners.
“We guarantee all applicants that the evaluation process shall meet all due processes and all requirements and we are looking forward to the best emerging to lift Nigerian crude oil amid the current economic realities. We assure you of transparency in this process,” the corporation stated.
In the same vein, in a largely transparent process last month, 78 companies submitted virtual bids to rehabilitate its downstream pipelines, associated depots and terminal infrastructure through the Finance, Build, Operate and Transfer (BOT) model. To ensure openness, the bidding exercise was witnessed by external observers which included the Bureau of Public Procurement (BPP) the Nigeria Extractive Industries Transparency Initiative (NEITI), Civil Liberty Organisation and the Centre for Transparency Watch (CTW).
The Director-General of the Infrastructure Concession Regulatory Commission (ICRC), Mr. Chidi Izuwah, who was apparently delighted, commended the leadership of the corporation for the transparent bid opening processes.
He noted that NNPC had through the bidding exercise shown the world that things could be done correctly such that would yield value for Nigerians.
“You showed to the world that you’re driving a totally transparent Public Private Partnership process in line with the infrastructure revolution of President Muhammadu Buhari.
“Today’spublicbidopeningfortherehabilitation ofNNPCpipelines,depots/terminalinfrastructure is quite commendable. I commend the GMD, Mallam Mele Kyari, his team and the NNPC Group for showing to the world that things can be done properly and in the best interest of the shareholders,” Izuwah said.
Perhaps, as an aside, it’s not only in terms of transparency that the company’s optics had gone a notch higher. The corporation said recently that its legal team saved about $5.4 billion in court cases through the victories it recorded in four cases involving the company.
NNPC listed the successful arbitration cases showcased by the its legal team at the conference as the IPCO (Nigeria) Vs. NNPC’s in respect of the dispute over the Bonny export terminal project in which $367.5 million was saved after 13 years of litigation.
It also named the ESSO E&P Nigeria Limited Vs. NNPC in respect of the dispute over the interpretation of the Production Sharing Contract (PSC) covering Oil Prospecting License (OPL) 209/Oil Mining Lease (OML) 133 in which the enforcement of a $2.7 billion claim was dismissed.
Other recent arbitration cases presented at the conference, the company said, included: ESSO & Others Vs. NNPC in respect of alleged breaches in interpretation and implementation of the PSC covering OPL 222/OML 138 with over $380.141 million saved.
Also mentioned by the corporation was the case between the Atlantic Energy Group vs. NPDC in respect of allegation of wrongful termination of Strategic Alliance Agreements (STA) over eight OMLs resulting in the award of $1.6 billion in favour of NPDC.
No Surprises
But those who know Kyari and his antecedents are barely surprised by the new air of transparency blowing through the NNPC as his appointment in June last year had elicited applause from industry players.
NEITI Executive Secretary, Waziri Adio, had described the choice of Kyari as a well-deserved appointment and a move that will enable more openness and reforms in the national oil company.
“Mr Kyari is a well-known transparency champion and one who enthusiastically shares the principles which underline the work of NEITI and the global EITI on good governance of the oil and gas industry,” he noted.
He explained that as a member of the global EITI working group on commodity trading transparency, Kyari’s appointment had placed him in a vantage position to push the frontiers of openness and to work more closely with NEITI and the global E IT I to implement remedial issues in NEITI’s reports. Earlier this year, that was achieved.
In his years of sojourn at the NNPC, Kyari had won the GMD Prize for the overall best performance for NNPC Management Development Programme and was also awarded the Group Executive Director (GED) award for the best performance in leadership.
Prior to his appointment as the GMD of NNPC, Kyari was Nigeria’s National Representative at the Organisation of the Petroleum Exporting Countries (OPEC) and also doubled as the Group General Manager, Crude Oil Marketing Division of the NNPC.
It’s not clear what will become of the NNPC when the Petroleum Industry Bill (PIB) comes into force after being passed by the national assembly and assented to by the president, but for now, what is obvious is that the corporation seems to be in safe hands and on the path of recovery.