Transparency is one of the values on which corporate organisations anchor for sustainable development and profitability. Nigeria’s national oil company – Nigerian National Petroleum Corporation (NNPC) is edging towards profitability driven by transparency, EMEKA UGWUANYI reports.
When the Nigerian National Petroleum Corporation (NNPC) began in 2018 to publicly publish its yearly Audited Financial Statement (AFS), it recorded a scandalous loss and got a lot of bashing from the Nigerian publics. The fury from the public also stemmed from unmet expectations and the conviction that everything about the national oil company’s operation over the years was shrouded in secrecy, lack of accountability and transparency.
In its 2018 audited financial report, the NNPC posted a loss of N803billion but in its 2019 audited financial report, the narrative changed, the losses dropped to N1.7billion, representing a recovery of over N800 billion.
Over the years, the NNPC had been heavily criticised for running its operation opaquely and was classified as one of Nigeria’s most corrupt public organisations. However, when the current Group Managing Director of the Corporation, Mallam Mele Kolo Kyari, came on board in 2018, he vowed to make changes that would make NNPC compare favourably with its contemporaries across the world in terms of financial prudence and operational excellence and openness.
He started with making public NNPC’s 2018 audited financial report. That first step marked the commencement of NNPC’s transparency and accountability journey. Since 2018, the Corporation has been publishing its monthly operations tagged “NNPC Monthly Oil & Gas Report,” and yearly audited financial statements in national media.
The Corporation has since then recorded a series of firsts on the transparency front. It published its 2018 Audited Financial Statement earlier in the year for Nigerians to see rather than the old style of surreptitiously submitting the report to statutory agencies like the Office of the Auditor General of the Federation. It also got listed as an Extractive Industries Transparency Initiative (EITI) partner company, thereby officially sealing its commitment to transparency.
If there is one thing transparency does to any organisation apart from showcasing its honesty and integrity, it helps to boost its performance; it helps to put its managers on their toes to do their best knowing that there is no room to hide their inefficiencies. This aptly applies to NNPC whose commitment to transparency is beginning to yield positive results in terms of huge reduction in losses – from N803billion losses in 2018 to N1.7billion losses in 2019.
When the 2018 audited financial report was published, many critics came hard on the Corporation calling it a laggard among its National Oil Companies peers. However, that particular open financial report has become a game-changer for the Corporation, and may launch it permanently on the path of growth and profitability.
The huge cut in losses is indicative of the new era of growth for the Corporation. According to TBI Africa’s findings, the huge loss reduction was achieved through improved performance driven mainly by cost optimisation, contracts renegotiation and operational efficiency.
One of the key pointers to the fact of cost optimisation in the Corporation as indicated in the 2019 audited financial statement is the huge reduction of the general administrative expenses from N894 billion in 2018 to N696 billion representing a saving of N198 billion or 22 per cent.
Also, majority of the NNPC subsidiaries, except the refineries, which have been shut down for rehabilitation, also recorded huge growth in profit. Its exploration and production arm, Nigerian Petroleum Development Company Limited (NPDC) recorded profit of N479 billion in 2019 compared to N179 billion in 2018 representing 167 per cent increase. Another subsidiary, Integrated Data Services Limited (IDSL) recorded profit of N23 billion in 2019 compared to N154 million in 2018, which represented 14966 per cent increase. Similarly, the Pipeline and Product Marketing Company (PPMC), another arm of NNPC, recorded profit of N14.2 billion in 2019 compared to N9.3 billion in 2018, representing 52 per cent increase.
Although some industry analysts argued that despite the impressive operational and financial performance, the 2019 audited financial statement showed that NNPC was still on the brink of bankruptcy as a going concern since its liabilities were still higher than the assets, but the current NNPC’s management said it is determined to make a difference. The determination, it noted, has been shown through its commitment to transparency and accountability, which in turn is reflecting in excellent performance as recorded in the huge improvement in its financial position – the huge reduction in losses.
If there will be a repeat of 2019 performance in 2020, NNPC will solidly be on the path of profitability especially if the management doesn’t renege on its commitment to cost reduction drive, promotion of efficiency, cost-saving and profit making. With these achievements, NNPC will also attain its aspiration of being and remaining the biggest and most profitable national oil company in Africa.
