The inauguration of Nigeria National Petroleum Company (NNPC) Limited is one of the significant events of the year. The new phase came with promises of transparency, accountability, responsibility and profit sustainability. The commercial-oriented and profit-driven entity, to be audited annually, will be independent although government bodies would be shareholders. Just like Saudi Aramco, its Saudi Arabian counterpart, NNPC Limited is expected to go public and give returns on investment to domestic and global investors.
Tales of big business ventures in July 2022 will be incomplete without highlighting the conversion of Nigeria National Petroleum Corporation (NNPC) into a limited liability company.
Nigeria National Petroleum Company Limited (NNPCL) is now at the centre of global oil business, with great expectations on how the new private entity will impact the economy and play significant role in the global oil sector.
The unveiling of NNPC Limited by President Muhammadu Buhari is the highpoint of 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 the oil industry and align it to global best practices.
The new phase in NNPC saw the emergence of its logo, an indication of a new direction and vision in the entity. The old logo was replaced across its petrol outlets, to launch a rebirth that would reposition the company to deliver “energy for today, and energy for tomorrow”.
During the inauguration in Abuja, Buhari said the oil firm has been changed from a wholly state-run entity to a commercial oil company, limited by shares.
NNPC Limited is expected to be managed as a private energy enterprise to produce results expected by stakeholders.
“We are transforming our petroleum industry to strengthen growth today, July, 19, 2022.
“NNPC Limited now will operate as a commercial oil company with over 200 million shareholders with integrity and excellence,” Buhari said.
The 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.
NNPC completed its incorporation last September, weeks after the the Petroleum Industry Act (PIA) was signed into law by President Buhari.
What followed was the floating of 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 would be shareholders. It will be audited annually.
Buhari said by chance of history, he was privileged to lead the creation of 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 the 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 July 1, 2022, authorised transfer of assets from Nigerian National Petroleum Corporation to its successor company, Nigerian National Petroleum Company Limited, steered the implementation leading to the unveiling of Africa’s largest National Oil Company today.
“I, therefore, thank the 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.”
Minister of State for Petroleum Resources Timipre Sylva said the unveiling of NNPC Limited is a new dawn in the quest for the growth and development of the oil and gas industry, opening new vistas 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 four 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.
NNPC’s Group Managing Director Mele Kyari said the National Assembly would no longer need to pass the appropriation for the purpose of its contribution to joint ventures, cash calls, and other obligations in various business agreements.
“What that means is that 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.
Besides 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 NNPC. It has 11 shareholders, with Kyari retaining his position as the group managing director, and Senator Mary Okadigbo as chairman.
Listing NNPC shares on NGX
NNPC Limited is expected to go to the market by mid-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 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 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 networth 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 per cent of the company’s value.
Kyari said the Initial Public Offering would 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 in the world,” he said.
NNPC achieved N287 billion profit for 2020, its first ever since it was set up in the 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 of Independent Petroleum Marketers Association of Nigeria (IPMAN) Mike Osatuyi said: “The Federal Government has declared 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 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 privatisation of NNPC would enable it negotiates 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.
Significantly, the migration to a limited liability company followed provision of the Petroleum Industry Act (PIA). Given the 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 NNPC Limited within six months of the enactment of 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 NNPC.
What is also new with the transition is that the government will no longer have control over the staffing of 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.
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 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 NNPC to a commercial entity, it is believed the Federal Government would put an end to funding the oil firm’s projects as obtainable since it was established in 1977.
For Kyari, NNPC’s transition would heighten demand for transparency and give Nigerians a greater sense of belonging to the oil giant, with domestic footprints.
