He spoke during the media tour of the Port Harcourt Refinery and the 15th  Rehabilitation SteerCo Meeting to announce ‘mechanical completion’ of phase one of the refinery. 

He said the ‘mechanical completion’ of refinery will herald  petrol production at the refinery. 

Lokpobiri said the phase one of the mechanical completion of the refinery by Nigeria National Petroleum Corporation (NNPC) has led to the planned production of petrol after Christmas break.

He said that phase two of the project will be completed by 2024 to ensure that full production is restored at the refinery. 

“The mechanical part is completed and this is the beginning of the completion of not just this Port Harcourt Refinery phase one and two, but the one for Warri, and then the one in Kaduna, so that we would be able to benefit from this massive investment that the country has made,” he said. 

The Port Harcourt Refineries has two units, with the old plant having a refining capacity of 60,000 barrels per day (bpd) and the new plant with 150,000 bpd, bring both capacities to 210,000 bpd.  

Also speaking at the event, NNPC Group CEO, Mele Kyari , explained the event was to announce that Port Harcourt Refinery pumps have been rehabilitated to allow circulation of crude within the facility.

“It is just to thank the team for doing a great work and for keeping the promise we made to over 200 million Nigerians, and we know that this is a promise we can keep. We have a competent contractor,, and subcontractors. Our staff have extremely determined to deliver on this project, and today, it is promise fulfilled. The phase two will be completed in the last quarter of 2024,” he said.

Continuing, he said: “We know all the skepticism that is in the public space but today has shown that we can fulfill commitments. NNPC is here to deliver value and we will get things done going forward,” he said. 

Kyari added: “We have done a great deal of work to get the refinery to work. Our team has been working 24 hours a day and we are happy with the results we have today”.

Also speaking, Minister of State (Gas) Petroleum Resources, Ekperikpe Ekpo, said with the commencement of petrol producduction after Christmas, there will be more LPG supply to the Nigerian market. 

He said: “The good news equally to LPG users that as the refinery commences after Christmas, we will have sufficient supply of LPG which will reduce the import at that level.

Chairman, NNPC Board, Chief Pius Akinyelure said he promised President Bola Ahmed Tinubu that the Port Harcourt Refinery will be ready by the end of this year 

” I am here this morning to witness this historic ceremony on the mechanical completion of the Port Harcourt Refinery. We are proud of the staff and entire management of the refinery. We will be at the highest level of production, and if possible export part of our production, ” he said. 

Continuing, he said: “Doubts had been expressed by several Nigerians about the ability of NNPC to make this facility available to support the distribution of fuel in the country. But today, I see them happy”.

Managing Director, Port Harcourt Refinery, Ibrahim Onoja, said the mechanical completion of the refinery is a historic achievement, for the country and economy.

He said: ” Today is a very happy day for me. I was part of the story from the beginning. We had a Presidential directive to get the refinery working. The NNPC Group CEO asked us to give him unassailable process that will not fail”. 

Continuing, he said: “We set governance in process and got the best team to do the work. We created a transparent project. We have 118 pumps in this first phase, the columns were filled and it will produce 60,000 barrels per day. It will create jobs and earn forex for the country, ” he said.

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Mrs Jumoke Oyedun, Chief Executive Officer (CEO), New House International Ltd., said this in a statement on Wednesday that the New House International Ltd., an indigenous event management company, would lead the delegation to the 2023 OTC in U.S.

Oyedun said that the annual event, one of the largest gatherings of oil and gas industry operators worldwide, would attract foreign investment and lead to partnership that would boost the regional oil and gas industry.

“The New House International Limited is an indigenous Events Management Company (EMC) registered also in the United States of America with a vision of supporting and promoting Small and Medium Enterprises (SMEs) from the African region to the global market.

“The company coordinates the exhibition, participation, and logistics of these SMEs in international conferences and exhibitions.

“OTC 2023 presents another unique opportunity for interested companies to showcase themselves,” she said.

According to her, the conference will afford participants the opportunity to meet with the best and latest technological development in the oil and gas industry worldwide.

She said that the conference would also afford the delegate to take advantage of the opportunities available in the global energy industry.

“The African delegation comprising of chief executives of oil service companies and government officials from the following confirmed countries and national corporations: Nigeria, Ghana, Senegal, Uganda, Tanzania, Uganda, Gambia, Namibia, Mozambique etc.

“They will during the conference, make several presentations aimed at highlighting the opportunities for investment in their respective oil and gas industry and will explore opportunities to attract foreign investment and partnership to boost regional oil and gas industry.

Oyedun said: “The CEOs of various oil companies will discuss and secure business transactions with relevant participating companies.

Major activity slated during OTC is Africa energy forum with the theme: “Building Resilience in Africa’s Energy Sector in the Era of Energy Transition”.

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Data from the National Bureau of Statistics (NBS) showed that Abia, Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Imo, Ondo, and Rivers were states that received the fund.

The 13 percent derivation fund comes from the federation revenue to oil-producing communities through the state governments as enshrined in section 162, sub-section 2 of the Nigerian constitution.

Analysis of the report by TheCable Index showed that Delta state received the highest allocation totalling N296.63 billion, representing 31 percent of the total revenue from the derivation account.

Delta is followed closely by Akwa Ibom, having received N222.52 billion, representing 19 percent of the total disbursement during the period.

Other states include Bayelsa (N188.02 billion), Rivers (N169.79 billion), Edo (N37.49 billion), Ondo (N25.95 billion), Imo (N18.61 billion), Abia (N6.95 billion), and Anambra (N4.25 billion).

The 13 percent derivation fund is different from the three percent provided for host communities in the PIA from the oil company’s operating expenses (OPEX).

In a controversial comment last year, Nyesom Wike, governor of Rivers, said President Muhammadu Buhari had approved the payment of funds owed to states in the Niger Delta since 1999.

According to Wike, the money approved by Buhari were funds owed from the 13 percent derivation, which he said have significantly aided his infrastructural strides in the state.

DESPITE DERIVATION FUNDS, DELTA, AKWA IBOM, BAYELSA AMONG MOST INDEBTED STATES

But despite the 13 percent derivation allocations, oil-producing states are still battling with high domestic debt and suffering from massive infrastructure decay.

According to the Debt Management Office (DMO), Delta leads with a total debt of N272.61 billion, followed by Rivers, and Akwa Ibom with N225.51  billion and N219.62 billion, respectively, at the end of Q3 2022.

Imo has a domestic debt of N207.52 billion, followed by Bayelsa, Edo, Abia, Ondo, and  Anambra with N151.16 billion, N110.99 billion, N104.57 billion, N78.82 billion, and 75.69 billion, respectively.

In an interview with TheCable last year, Ikemesit Effiong, head of research at SBM Intelligence, had said that oil-producing states ignored workable revenue initiatives because of crude oil income.

Effiong explained that because oil-producing states command a healthy portion of the national income, they are not motivated to “build the durable revenue generation and infrastructural structures that would ordinarily guarantee sustainable economic development, simply because crude oil income is available for them to spend”.

“There is also the situation where a lot of the players in the oil and gas sector which operate in these communities offer to stand in the gap in meeting some of these infrastructural needs, but host communities stand as a roadblock by demanding even more income rent from them,” he said.

“This leaves state governments with the lion’s share of responsibilities in meeting the infrastructure needs that major oil and gas players would have taken care of, further driving up subnational commitments.

“In the end, crude income is easy money, and easy earnings are also easy to spend, so these states are too relaxed to look for creative ways to build robust revenue generation structures.”

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Mr Chinedu Okoronkwo, the National President of IPMAN, confirmed  in Lagos.

Okoronkwo said the order was directed after a close door meeting of IPMAN executive and NNPCL management.

He said the meeting resolved that IPMAN members should load petrol at NIPCO, MRS and other loading depots.

He said the NNPCL management had confirmed that the  product had been released to the depots for immediate loading by IPMAN members.

He said IPMAN members were encouraged to upgrade their POS to G4 or G5 for payment efficiency.

According to him, “Members without POS are also advised to acquire it for efficiency.

“The arrangement was in collaboration with NNPCL Retails Ltd. and IPMAN.

“IPMAN Members are advised to open up their stations and start selling to the public nationwide.”

Okoronkwo said IPMAN was a responsible association with over 85 per cent filling stations across the nooks and crannies of Nigeria.

He added that lPMAN would in a few days’ time also massively load at NIPCO and MRS depots massively for South West and North West parts of the country.

Okoronkwo enjoined members who had made payments to commence loading of petrol from the designated depots.

He said the meeting was attended by the National President of IPMAN, Chinedu Okoronkwo, the Chairman BOT, IPMAN, Alhaji Abdulkardir Aminu and other executive committee members of IPMAN.

He said Mr Adeyemi Adetunji, the Executive Vice President Downstream, Mr Lawal Sade, the Managing Director of the NNPCL Trading and Mr Huub Stokman, Managing Director, NNPC Retail Ltd were also in attendance.

Consequently, lPMAN has reversed its earlier order that its members should suspend all operations across the country.

The directive overriding the initial “shut-down-of- operations” order was contained in a two-paragraph statement by its Chairman, Alhaji Mohammed Kuluwa.

Kuluwa said IPMAN had ordered immediate reversal and directed oil marketers to resume operations nationwide.

Entitled: “Re: Suspension of service,” the statement dated Feb.7, reads: “Having met with the concerned authorities, all filling stations should open with immediate effect and continue selling while the association continues with further consultations.

“We will accordingly keep you informed.”

NAN reports that IPMAN had earlier directed its members to suspend payment for products from source until further notice.

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In recent times, however, the new Chairman of the Nigerian Governors Forum, “Petroleum Subsidy”, takes the largest share of the national cake”, leaving crumbs for the remaining 36 States to share. In fact, it not only leaves crumbs for the states but the federal government, as well, has no respite from this new order that has seen the shrinking of its piece of the cake. 

It will cost Nigeria, Africa’s second largest producer of crude oil, an estimated N4 trillion naira to subsidise the price of petrol in 2022. To put this cost in proper context to examine the magnitude of Nigeria’s subsidy cost, the cumulative budget size of the 36 States of the Federation for 2022 is N9.65 trillion. The total revenue realised in 2020 by the Nigerian National Petroleum Corporation (NNPC) Group, including all its subsidiaries, is N4.6 trillion.  Similarly, the federal government generated N3.9 trillion as  revenue in 2020.. 

Petroleum Subsidy in itself isn’t a bad policy of the government, however, when a policy begins to fail and negates its intended objectives, it requires a critical assessment. This is important because the futures of government, security, health, education and development depend on it. Whatever the final decision the assessment will lead to, will determine the fate and corporate existence of the nation referred to as Nigeria in no small measure.

Historical Context of Nigeria’s subsidy program

Petroleum subsidy was introduced in Nigeria when the energy crises in the 1970’s drove the price of crude oil per barrel  from $3 to $12. Sustenance of the petroleum subsidy program has come at a huge cost to the Nigerian State. Nigeria’s petroleum subsidy cost has risen by 1,452% from N257.36 billion in 2006 to N4 trillion in 2022. According to the  Petroleum Products Pricing Regulatory Agency (PPPRA), it cost Nigeria  a cumulative sum of N8.94 trillion to subsidise petrol between 2006 and 2015. Nigeria’s 2022 petroleum subsidy budget is more than half what it cost the country to subsidise the product for 10 years.

In a study conducted by BudgIT, it was revealed that only 2 states, Lagos and Rivers, were able to meet their operating expenses with revenues generated internally in 2020: The 34 other states had to significantly rely on federal transfers (which is made up primarily of oil revenue) and Value Added Tax (VAT) to implement their budgets. In the first quarter of 2022, the NNPC made zero remittance to federation accounts on the account of subsidy payments, leading to a notable reduction in revenue available to be shared by different tiers of government. Without a doubt, Nigeria’s petroleum subsidy program in recent times has crowded out spending on physical infrastructure and needed investments in critical social sectors like health, education, water, sanitation and health (WASH) and social protection. 

Why has Nigeria’s petroleum subsidy program failed?

The burden of petroleum subsidy has continued to weigh down heavily on the Nigerian State owing to the highly volatile price of crude oil (with the attendant exchange rate differentials-driven challenges) and because over time, Nigeria has refused to improve its capacity to refine crude oil locally. Nigeria currently has 4 refineries—two in Port Harcourt, one in Warri and one in Kaduna—with a combined installed capacity to refine 445,000 barrels of crude oil per day. Nonetheless, the four refineries continue to incur annual operational costs without refining a single barrel of crude oil per day. Worse still, the four refineries incurred a cumulative loss of N486.54bn between 2016 and 2020. In the same vein, licences issued to more than twenty investors to engage in modular refining have not yielded the desired results due to pricing regulations and pipeline vandalism. 

Smuggling of PMS has been a major driver of the increase in Nigeria’s petroleum subsidy cost. It is estimated that at least 15.6 million litres of PMS per day is smuggled across Nigeria’s borders to its neighbouring countries. There exists a major incentive for the smuggling of PMS across Nigeria’s borders due to the major price disparity of PMS between Nigeria and its neighbours. While PMS currently sells for 165/litre in Nigeria, it sells for between N577/litre and N660/litre in the countries bordering Nigeria. Nigeria’s reported daily consumption of PMS has grown astronomically in the last 7 years with very little empirical evidence to back it up. Nigeria’s average daily consumption has grown from 20.52million litres in 2015, to to 40.74million litres in 2020, and 50.49million litres in 2021. In the first 3 months of 2022, the country recorded a daily average consumption of  64.14million litres. Despite the fact that it will cost Nigeria roughly N11bn daily to fund subsidy in 2022, very little has been done to establish an intelligence-driven accountability mechanism to track the “apparent distribution” of PMS across the federation and stem the smuggling of the product across Nigeria’s borders.

What will it cost Nigeria in the short run to remove petroleum subsidy?

There is no gainsaying that the removal of petroleum subsidy will significantly impact the lives of Nigerians, 83 million of whom currently live in extreme poverty. The removal of petroleum subsidy will in the short-run certainly have a multi-dimensional socio-economic impact on the lives and livelihoods of Nigerians. With an estimated population of over 200million people and a paltry power generation of about 4,000 megawatts, Nigeria’s per capita energy consumption of 144kWh is below the sub-saharan average of 180kWh and the Europe average of 6,500 kWh. Majority of Nigerians have to rely on petroleum-powered generators due to poor access to electricity from the national grid to make up for the energy gap. Similarly, micro, small and medium scale enterprises have to rely on petroleum-powered generators to run their operations, resulting in a significant part of their operational cost being allocated to energy.

Furthermore, the major source of transportation for the majority of the populace, the bulk of whom are poor, is petroleum-powered vehicles. There is a correlation between the pump price of petrol and the price of basic commodities in the marketplace.  An increase in the price of petrol often results in a corresponding increase in the price of basic commodities in the marketplace. The World Bank has projected that the removal of subsidy will prompt an increase in Nigeria’s inflation by 3 basis points (3%). It is certain that the removal subsidy will in the short-run result in an increase in the price of goods and services, reduce the purchasing power of Nigerians, and push more Nigerians further below the poverty line. However, the current petroleum subsidy regime is unsustainable and will compromise Nigeria’s fiscal sustainability in the short, medium and long term, cripple service delivery and in the long run push a lot more Nigerians below the poverty line. 

Wider Trust Deficit

The “jury’s verdict” on Nigeria’s petroleum subsidy program is that it needs to end. However, the general perception is that savings from the removal of subsidy will not be utilized for pro-poor programs and improved service delivery. So the real questions are: “why should the average Nigerian pay more for a litre of petrol, if the resultant extra revenue that accrues to the government will not be used for causes that improves his/her life? Will subsidy removal create a fiscal space for improved spending in critical social sectors like health, education, WASH? Or Will it create a fiscal space for more plundering Nigeria’s commonwealth? These are critical questions that beg for cogent answers.

Expenditure patterns by the federal and subnational governments show that the country has historically not efficiently and effectively used the windfall of oil revenues to bridge Nigeria’s huge infrastructure deficit, improving universal health coverage and access to quality education and electricity WASH and improving other human capital development indicators. For emphasis, at the subnational level, state’s have prioritised spending on religious pilgrimages, airports, international worship and conference centres, and many other capital-intensive white elephant projects over investments in education, health, social protection, agriculture and (WASH). At the federal level, the country’s annual budget seems to reflect the interests of the political elites and bureaucrats rather than the developmental aspirations/objectives of the country articulated in the National Development Plan. There are massive loopholes for corruption and expenditure inefficiency with the situating of projects in the budgets of MDAs that have neither the mandate nor the capacity to implement such projects and the inclusion of projects that should be the clear mandate of the subnational governments.

Many believe corruption is the major bane of Nigeria’s weak revenue mobilisation profile. According to the House of Representatives, Nigeria lost $7 billion to subsidy fraud perpetrated by some oil marketers and their enablers within the civil service. Many of those indicted are yet to be brought to book. The Inability of the government to hold people accountable and establish strong deterrents for the commission of crime has encouraged more people to commit at alarming rates. 

Conclusion and Recommendation

Considering the current cost of petroleum subsidy to Nigeria, its removal is an imminent reality; nevertheless, a couple of things need to be in place for the removal of subsidy to gain public acceptance. 

The government recently deployed $1.5 billion to rehabilitate the Port Harcourt Refinery. Nigerians want to get value for money and see their refineries work, but this must be accompanied by transparent, accountable and verifiable government operations that are carried out with enough time for Civil Society to respond accordingly. 

Secondly, through their budgets, the government projects and programs need to be geared towards pro-poor causes and reflect the aspirations of Nigerians. These projects must be conceptualised, implemented, completed and continuously evaluated with citizens’ input. Every stage must involve the input of citizen groups to provide the much-needed legitimacy that the government seems to be sorely lacking. Thirdly, the attitude of the political class and bureaucrats do not suggest to the average man that the country is broke and going through a revenue crisis. A case in point is the immediate past junior Education Minister and the Labour Minister purchasing presidential nomination forms for N100 million naira when Nigeria’s tertiary education system h                                                                                                                                                                                                                                                                                                                                                                                                                                                     bbas been shut down for 5 months. Though this would involve a systemic evaluation of the norms of what is acceptable behaviour by politicians and bureaucrats, one thing is sure; citizens’ buy-in and trust in the government’s decision to remove petrol subsidies must be met with real behaviour change. In this way, the citizens-the government’s primary constituents would provide the much-needed support for the transition away from the subsidy. In closing, it is essential to state that the government at both the federal and subnational levels and political elites cannot carry on with “Business as Usual” and expect Nigerians to accept “Business Unusual” policies. 

.Iniobong Usen, Research and Policy Advisory Lead at Budgit 

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The new commercial-oriented and profit-driven  entity, to be audited annually will be independent of government, although government bodies remain its shareholders. Like Saudi Aramco, its Saudi Arabian counterpart, NNPC Limited  is expected to go public next year and give returns on investment to domestic and global investors.

Tales of big business ventures in the month of July 2022 will be incomplete without highlighting the conversion of Nigeria National Petroleum Corporation (NNPC) into a Limited Liability Company.

The NNPC Limited is now at the centre of global oil business, with great expectations on how the new private entity will impact the Nigerian economy and  play significant role in the global oil sector.

The unveiling of NNPC Limited by President Muhammadu Buhari was the highpoint of long-years of planning and decision making to make NNPC a more commercially viable private entity with greater transparency and impact on the lives of the people.

As a commercial venture, NNPC is expected to strengthen the capacity and market relevance of Nigeria’s oil industry and align it to global best practices.

The new phase in NNPC saw the emergence of its new logo an indication of a new direction and vision in the entity. The old logo was replaced with the new logo across its petrol outlets, to flag off a rebirth that would reposition the company to deliver “energy for today, and energy for tomorrow”.

At the inauguration held at the presidential banquet hall in Abuja, President Buhari said the oil firm has been changed from a wholly state-run entity to a commercial oil company, limited by shares.

The NNPC Limited is expected to be managed as a private energy enterprise to bring about the desired results expected by all stakeholders.

“We are transforming our petroleum industry to strengthen the growth today July, 19 2022,” Buhari said.

“NNPC Limited now will operate as a commercial oil company with over 200 million shareholders with integrity and excellence.”

The official unveiling came weeks after the corporation transitioned into a company whose operations will be regulated by the Companies and Allied Matters Act (CAMA). The legal transition, based on the new Petroleum Industry Act, took effect July 1.

The NNPC completed its incorporation in September last year weeks after the the Petroleum Industry Act (PIA) was signed into law by President Buhari.

What followed was the floating of the NNPC Limited with an initial capital of N200 billion, making history as the company with the highest share capital in the country.

The new entity is expected to become a commercially oriented and profit-driven national petroleum company independent of government, although government bodies remain its shareholders. It will be audited annually.

Buhari said by chance of history, he was privileged to lead the creation of the Nigerian National Petroleum Corporation on July 1, 1977. Forty-Four years later, he was again privileged to sign the Petroleum Industry Act (PIA) in 2021, heralding the long-awaited reform of our petroleum sector.

“The provisions of PIA 2021 have given the Nigerian petroleum industry a new impetus, with an improved fiscal framework, transparent governance, enhanced regulation and the creation of a commercially-driven and independent National Oil Company that will operate without relying on government funding and free from institutional regulations such as the Treasury Single Account, Public Procurement and Fiscal Responsibility Acts,” Buhari said.

“It will, of course, conduct itself under the best international business practice in transparency, governance and commercial viability.”

“Coincidentally, on the 1st of July 2022 authorized transfer of assets from the Nigerian national petroleum corporation to its successor company, the Nigerian national petroleum company limited, and steered the implementation leading to the unveiling of Africa’s largest national oil company today.

“I, therefore, thank Almighty God for choosing me to consistently play an important role in shaping the destiny of our National Oil Company (NOC) from the good to the great.

“NNPC Limited will operate as a commercial, independent and viable NOC at par with its peers around the world, to sustainably deliver value to its over 200 Million shareholders and the global energy community, while adhering to its fundamental corporate values of Integrity, Excellence and Sustainability.”

The Minister of State for Petroleum Resources, Timipre Sylva, said the unveiling of NNPC Limited was a new dawn in the quest for the growth and development of the Nigerian oil and gas industry, opening new vintages for partnerships.

“While the country was waiting for the PIA, Nigeria’s oil and gas industry lost about $50 billion worth of investments. In fact, between 2015 and 2019, KPMG states that “only 4 per cent of the $70 billion investment inflows into Africa’s oil and gas industry came to Nigeria even though the country is the continent’s biggest producer and the largest reserves,” Sylva said.

“We are setting all these woes behind us, and a clear path for the survival and growth of our petroleum industry is now before us. With the PIA assuring international and local oil companies of adequate protection for their investments, the nation’s petroleum industry is no longer rudderless.

“The PIA avails us with the golden opportunity to strengthen our institutions, improve our regulatory and fiscal frameworks and attract the much-needed investments. Some of the golden opportunities presented by the reforms are coming at a time when the global energy conversation is moving towards gas as a cleaner energy fuel,” he added.

He said the NNPC Limited will operate as a profitable commercial entity and declare dividends to its shareholders.

“I have no doubt that the leadership of this brand new Limited Liability Company is super-charged to meet the high expectations,” he said.

The NNPC, Group Managing Director Mele Kyari said the national assembly would no longer need to pass the appropriation for the purpose of its contribution to the joint ventures, cash calls, and all other obligations in the various business agreements.

“What that means is that the NNPC must now look for financing without recourse to the state. And indeed, the law is very, very clear that we will have no recourse to public funds,” he said.

Before the official transition, the oil firm had secured a number of funding commitments from investors.

Also, with NNPC Limited, it is no longer business as usual for the management and board of the company.

Apart from profit-seeking, NNPC Limited is expected to operate above board by mandatorily making disclosures for every financial year.

The rebranded Corporation has an initial shareholders Fund of N200 billion which for now is evenly held by the Ministry of  Finance and the NNPC. It has 11 shareholders with Mele Kyari retaining his position as the Group Managing Director with Senator Mary Okadigbo as Chairman

Listing NNPC shares on NGX

The NNPC Limited is expected to go to the market by the middle of  the year 2023 to raise money from the public, which opportunity will of course initially be dominated by Nigerians.

An IPO will allow a proper valuation of the national oil company and diversification of the shareholder base to include institutional and retail investors rather than just the Federal government.

“We are convinced that by the middle of next year, this company will be IPO-ready, which means that you will have the system, processes and a company that is accountable to its stakeholders and shareholders,” Kyari said.

It will be good to court international investors to give the organisation desired International outlook to underscore the fact that best practice would be the order of the day.

“We expect that preparatory to taking the company to the

market that proper evaluation will be professionally undertaken to determine the actual net worth of the company,’ analysts said.

Like Saudi Aramco, its Saudi Arabian counterpart, it is expected that NNPC Limited may decide to go public later in future.

Saudi Aramco went public in December 2019 — the biggest IPO at the time – after raising a record $25.6 billion by selling three billion shares, amounting to 1.5 percent of the company’s value.

Kyari said the Initial Public Offering will help Nigeria keep pace with the global energy transition in a bid to unlock its benefits.

“IPO already means this company is going to be profitable. It  represents a view of how things can be done better to align with best practices in the industry, trying to see how we can latch on the existing framework for energy transition that is ongoing all the world,” he said.

The NNPC achieved N287 billion profit for 2020, its first ever since it was set up in 1970s. In the long run, this is going to be a great company and great companies always go for IPO.”

Other stakeholders speak

National Operation Controller, Independent Petroleum Marketers Association of Nigeria (IPMAN), Mike Osatuyi,  said, “The Federal government has declared the NNPC Ltd. as a limited liability company, limited by shares. If it is a company limited by shares, the government will have its own dividends by the end of the year. Let’s give them time for transition and restructure.”

An expert in the oil and gas sector, Henry Abiodun, said the privatization of NNPC will enable it negotiate independent businesses and source for deals, and entrench more disclosures on how its operations are run.

“It will be independently run, and open its book more now to the public, like its peers, Brazil’s Petrobrass, Saudi-Aramco and other publicly qouted national oil firms do. The transition would enhance competitiveness and lead to the gradual phase-out of petroleum subsidy,” Abiodun said.

Very significantly, the migration to a limited liability company followed the provision of the Petroleum Industry Act (PIA). Given the many obstacles clogging the defunct Nigerian National Petroleum Corporation (NNPC), stakeholders clamoured for reforms to induce profitability, transparency and overall development. Hence the signing of the PIA in 2021.

Section 53(1) of PIA 2021 requires the minister of petroleum resources to cause the incorporation of the NNPC Limited within six months of the enactment of the PIA in consultation with the minister of finance on the nominal shares of the company.

In September 2021, the Corporate Affairs Commission (CAC) completed the incorporation of the NNPC.

What is also new with the transition is that the government will no longer have control over the staffing of the NNPC.

NNPC Limited will operate “free from institutional regulations, such as the treasury single account, public procurement, and fiscal responsibility act,” Buhari said at the unveiling of the company.

Section 53 (5) of the Act stipulates that shares of the company held by the government are not transferable or mortgaged unless approved by the government and national economic council.

It further stated that by way of securitisation, any sale or transfer of shares of NNPC Limited shall be at a fair market value and subject to an open, transparent and competitive bidding process.

The sale or transfer of the shares shall be on an equal proportion basis of shares held by the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated.

Following the transition of the NNPC to a commercial entity, it is believed the federal government would put an end to funding the oil firm’s projects as was obtainable since it was established in 1977.

The PIA also mandates NNPC Limited to conduct its affairs on a commercial basis in line with the Companies and Allied Matters Act. According to the law, the company will run on a commercial basis in a profitable and efficient manner without recourse to government funds. It shall declare dividends to shareholders and retain 20 percent of profits as retained earnings to grow its business.

For Kyari, NNPC’s transition would heighten demand for transparency and give Nigerians greater sense of belonging to the oil giant, with domestic footprints.

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As a private sector enterprise, NNPC Limited is expected to create improved and more transparent operational framework for Nigeria’s oil and gas industry while sustaining confidence of local and foreign investors. The move, backed by the Petroleum Industry Act (PIA) will enhance NNPC Limited’s operational efficiency and profitability.

The conversion of the Nigerian National Petroleum Company (NNPC) Limited from public to private sector enterprise was considered impossible several decades ago.

That explains why not too many people saw the reforms and unbundling of the NNPC  into commercially-oriented and profit-driven smaller units coming.

Then on September 2021,  the Corporate Affairs Commission (CAC) completed the incorporation of the NNPC Limited in accordance with the new Petroleum Industry Act (PIA), a law that had taken almost 20 years to bring to fruition.

With the hurdles off the way and official documentation completed as specified in Section 53(1) of the law,  the operationalisation of the Act to transofrm the troubled petroleum industry in the country commenced.

The PIA was signed into law by President Muhammadu Buhari on 16th August, 2021, following its passage by the National Assembly in July of the same year.

Specifically, Section 53 (1) of the Petroleum Industry Act 2021, requires the Minister of Petroleum Resources to cause for the incorporation of the NNPC Limited within six months of the enactment of the PIA in consultation with the Minister of Finance on the nominal shares of the Company.

With the registration by the CAC, the NNPC Ltd was floated with an initial capital of N200 billion.

Group Managing Director of the NNPC, Mallam Mele Kyari, said NNPC Ltd is expected to become a commercially-oriented and profit-driven national petroleum company that would be the envy of all players in the sector.

He disclosed that the NNPC would be managed like a private sector enterprise that is more efficient in its operations, effectively maximize returns on investment for the 200 million Nigerians, ensure returns for shareholders and pay taxes to the government.

Kyari said that President Muhammadu Buhari will officially unveil the new NNPC Ltd on July 19 and invited all players in the sector to be part of the epoch-making event.

At the same time, Section 65 of the Act encourages NNPC Limited and its joint venture partners to explore the use of incorporated joint venture companies.

Consequently, he said the firm may be required to declare dividends to its shareholders as well as withhold 20 per cent of profit as retained earnings to grow its business like any other incorporated entity incorporated under the CAMA.

“Consequently, our company, the NNPC Limited will be unveiled on 18th of July 2022 by our president, and I invite you to join us in Abuja Nigeria for the historic event as we create the largest corporate entity in Africa,” he told a gathering of oil and gas professionals recently.

Speaking separately in a recent interview on a national television, he stated that when the NNPC is fully commercialised, the company will no longer render free services to the federal government.

Kyari noted that from then, all services rendered to the government by the NNPC limited or its subsidiaries will come at a cost to government, including the remittance of federation crude account funds.

He stated that the NNPC was on course towards its final lap of completion, explaining that it will no longer have access to government funding, but would survive based on its internal resilience and efficiency.

“First of all, the PIA is very clear that within six months, we must incorporate the NNPC as a company that is bound by the CAMA. The meaning of this is that you must be fully commercial, you must be profitable.

“It means that you will have no access to any other results, other than from your own production and your own productivity. So, that means that NNPC will be the different company that it has to be.

Kyari said that when NNPC becomes a limited liability company, it will operate in a competitive environment, with the sole aim of making profits.

He pointed out that the NNPC decided to be more transparent in its operations because of the perception of Nigerians that the company operates in a very opaque environment, explaining that even for its lenders, the condition of accountability remains sacrosanct.

“We know for sure, that historically many people have doubts about what NNPC does. Our shareholders think that we are an opaque company, that we are not representing them well, and that we don’t know what we are doing”.

“We know that trust is very essential for our business. We also know that our partners, you know, financial institutions, even commercial partners would like to see and know what we are doing, so that they can invest in our company.

“So we know that making transparency and accountability, a primary focus of our activities will serve the best interests and will also enable our partners to see what we are doing, so borrowing will become easier for us,” he added.

Understanding the PIA

The PIA directs license holders to establish Host Community Development Trust(s) (HCDT) to manage community-related projects and issues within areas of operations.

Thus, existing Corporate Social Responsibility and community Memorandum of Understanding (MOU) must transfer projects and assets into these trusts.

For funding, the PIA sets a three per cent charge on the preceding year’s operating expenditures for upstream activities and two per cent for midstream and downstream activities. These activities focus on Petroleum product depots, Refineries, Gas processing plants, Fertiliser plants,
Compressed Natural Gas (CNG), Liquified Petroleum Gas (LPG) depots, and Liquified Natural Gas (LNG).

The implementation of the contents of the PIA will see to the incorporation of a commercial and profit-focused NNPC Limited under Companies and Allied Matters Act (CAMA), with ownership vested in the Ministry of Finance Incorporated (and Ministry of Petroleum Incorporated) on behalf of the Federation to take over assets, interests and liabilities of NNPC. This structure is expected to pave the way for the eventual sale of shares to Nigerians.

Views from stockholders

Analyst at Renaissance Capital, Nikolas Stefanou,  gave new insights on what NNPC should do. “As international investors, in particular the majors, are divesting their exposure from Nigeria’s upstream sector, the onus now is on the indigenous companies and NNPC to inherit operatorship, invest and grow production.

According to him, the majors’ divestment theme is not new in Nigeria and has been ongoing for over a decade now, leading to the creation of many indigenous companies, some of which invested and increased production from the acquired assets (the success stories), while some others achieved little progress.

“For stakeholders in Nigeria’s upstream sector, the hope is for a Nigerian oil sector renaissance to follow post the majors’ divestments, with indigenous companies successfully taking over by investing in and growing production,” he said.

The report titled: ‘Nigerian O&G- The stakes are high’,  Stefanou, disclosed that  issues like under-investment in Nigeria’s oil sector, combined with low infrastructure uptime and sabotage/oil theft will be corrected by the NNPC current status.

In emailed report to investors titled: ‘2022 Outlook: A Gentle But Steady Recovery’ , Head, Equities at FBNQuest Capital,  Olubunmi Asaolu, said the PIA attempts to create a new and more transparent framework for Nigeria’s oil and gas industry.

He disclosed that locally, there were significant changes in the oil and gas industry. The most obvious was the passage of the PIA into law because its passage was the most substantial piece of legislation for the industry in decades. The new law’s scope is wide-ranging but focuses on building a more efficient, profitable, and energy future-relevant industry.

“The PIA incorporated the national oil company, NNPC. It established two new regulators, the Nigerian Upstream Regulatory Commission (the Commission) and the Nigerian Midstream and Downstream Regulatory Authority (the Authority). This establishment was through combining functions of the now-defunct Department of Petroleum Resources, the Petroleum Institute, the Petroleum Equalization (management board) Fund, and Petroleum Products Pricing Regulatory Authority,” he said.

In addition, the PIA will create a more competitive fiscal environment for the country and has eliminated investor doubts on fiscal terms.

The Executive Director, Civil Society Legislative Advocacy Centre (CISLAC), Auwal Musa Rafsanjani, called for increased public trust and investors’ confidence in the NNPC following the reforms in the sector.

He said the PIA  law stipulates that NNPC be fully commercialized within a process that is also stipulated in the law.

He said the impact on the economy is looking good. “With the public being shareholders in the establishment will entail the public will benefit from the dividends of the business so also the government who holds 60 per cent of the shares. There is a potential of better management of the institution as it will be managed prudently as a private business,” he said.

Laos speaking, the President, Nigeria Gas Association (NGA), Ed Ubong said the PIA is the key that can transform the oil and gas sector, describing it as the biggest achievement of this government.

Speaking during the 5th Nigeria International Energy Summit (NIES 2022) held in Abuja, with the theme: “Revitalising the Industry: Future Fuels and Energy Transition”, he said that  the PIA  plays a major role in driving the Nigeria gas agenda.

Company and Allied Matters Act  

With the passing into law of the reformed Company and Allied Matters Act (CAMA, 2020), which replaced the CAMA 1990 Act, companies like the NNPC are now provided a regulatory framework for how businesses should be carried out in the country.

These include the framework on areas of shareholding, registration processes, statement of compliance, minimum share capital, audit obligations among others.

Being now a commercially-oriented and profit-driven entity, the NNPC is expected to be managed like a private sector enterprise , well in some sense, and devoid of government’s brazen interference.

In essence, these processes, it is expected would translate to a more efficient, slim and nimble national oil firm, which is able to take decisions without constant recourse to the powers that be.

Analysts explained that like every other company in the country, NNPC will pay taxes to the government and eventually be able to pay dividends to its shareholders, represented by government in its teething stages and then the public when it decides to have an Initial Public Offer (IPO).

Furthermore, the new NNPC will serve as a holding company for all its subsidiaries, over a dozen of them, in the post-PIA era.

Under the new arrangement, the new NNPC will review its existing assets and liabilities, determine those that it intends to operate based on sustainable commercial principles and incorporate those assets into her balance sheet.

Since the NNPC does not and cannot operate without partners or third parties, those of them with subsisting contract(s) and joint operating agreements with the NNPC, will also have their fate determined by the PIA.

This development will come drawing from Section 54 of the PIA, which provides that all assets and liabilities of the NNPC will be transferred to NNPC Ltd within the first 18 months of the PIA coming into effect.

Further to that, Subsection 2 of the Act states that any assets, interests, or liabilities not transferred shall remain that of the NNPC until extinguished or transferred to government. This means that some toxic assets may be excluded.

When the transitioning takes off in effect, existing contracts and Joint Operating Agreements (JOAs) with NNPC will be evaluated and transferred in line with agreed principles to ensure business continuity.

As a business under CAMA and with the overarching guidelines of the PIA, the NNPC Ltd., or the new NNPC will enter new investments and partnerships in upstream assets to increase gas production.

It is also expected to expand its downstream operations, while modular or small-scale refineries will be developed in addition to current investment in rehabilitation of existing refineries to ramp up in-country refining.

Also, in transforming to a CAMA company, the NNPC will need to source for private funding, outside the apron strings of the government. It is also expected, to, due to a renewed commitment to transparency, scale up its credibility to its creditors.

The NNPC recently  secured a $5 billion corporate finance commitment from the African Export Import Bank (Afreximbank) to fund major investments in Nigeria’s upstream sector. That’s, perhaps part of the initial funding for the activities of the new entity.

In another connection, the company has hinted that it will be raising between $3.5 billion and $5 billion as corporate finance to fund major upstream investments and would be pushing to take over ownership from non-investing partners through acquisition of pre-emption rights in the sample Joint Ventures (JVs).

NNPC’s profitability / transparency 

The NNPC recently released its 2020 Audited Financial Statements (AFS) which showed N287 billion group profit, up from N1.7 billion loss position in 2019.

The publication of the NNPC’s Audited Financial Statements on its website followed President Muhammadu Buhari’s declaration of N287 billion Profit After Tax (PAT) in the year 2020 for the corporation.

While announcing the outstanding feat a little over a fortnight ago, President Buhari, who is also the Minister of Petroleum Resources, had said: “I have further directed the Nigerian National Petroleum Corporation to timely publish the Audited Financial Statements in line with the requirements of the law and as follow up to our commitment to ensuring transparency and accountability by public institutions”

Kyari, had at various times since the President’s declaration of profit, attributed the turnaround to aggressive cost cutting, automation of the system and renegotiation of contracts downwards by about 30 per cent, among other tough measures.

Analysts said Nigerians, the economy, shareholders and other stakeholders will benefit from the new reforms at NNPC centre on transparency and efficiency of operations.

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