In August 2021, President Muhammadu Buhari signed the Petroleum Industry Act (PIA). This birthed various reforms in the sector among which is the transition of the NNPC to a limited liability company. ADETOLA BADEMOSI writes on what Nigerians should expect from the new entity.
On July 19, President Muhammadu Buhari unveiled a new Nigerian National Petroleum Company Limited (NNPCL) which transitioned from the old Corporation to a limited liability company, in line with the provisions of the Petroleum Industry Act (PIA).
This came upon incorporation of the Company on September 21, 2021 by the Corporate Affairs Commission (CAC) in line with the Companies and Allied Matters Act, 2020.
As a result, the NNPCL was floated with a N200 billion initial share capital.
No doubt, the widely publicised event would have raised questions in the heart of many as to what the implication of this is to the country at large.
At the unveiling, the President made crucial statements regarding the Company’s new identity. First, that the national oil company would now operate independently and free from institutional regulations such as the Treasury Single Account, Public Procurement and Fiscal Responsibility Act.
It is worthy of note that before now, the Company was solely owned and funded by the government and bound by relevant institutional regulations.
But with the transition, NNPCL is now profit-driven and free to operate independently.
Secondly, that the Company would now be regulated in line with the Companies and Allied Matters Act (CAMA).
Also in an interview with journalists, the Group Chief Executive Officer, Mallam Mele Kyari, while responding to questions on the monthly remittance to Federation Account Allocation Committee said the NNPCL would no longer remit to the account.
According to him, the Company, like other private companies, would now pay taxes, royalties and also deliver dividends to its shareholders.
“We are now a private company. Would MTN go to FAAC? We will pay our taxes, we will pay our royalties and we will deliver dividends to our shareholders,” he said.
Transparency, good governance
Prior to the transition, political interference, lack of transparency and accountability, bureaucracy shrouded activities of the Company.
But with the new development, the company would offer its shares to the public via an Initial Public Offering and must be approved by the government and endorsed by the National Economic Council on behalf of the federation.
Also, the new entity is expected to list on the stock exchange with the sale of shares to the public, like Petrobras of Brazil and Aramco of Saudi Arabia
Kyari, had at various occasions, affirmed that the move would foster transparency and promote good governance through efficient operations.
According to him, because it would be managed like the private sector, the Company is enabled to effectively maximise returns on investment for the 200 million Nigerians, ensure returns for shareholders and pay taxes to the government.
However, he reiterated that all assets and liabilities of the NNPC would be transferred to the new company.
Increased revenue to government
Before now, the Company would, on a monthly basis, remit oil revenue into government coffers which is shared among the three tiers of government – federal, states and Local Governments.
But in the last few months, it could not discharge its responsibility to FAAC amidst accumulated subsidy debts.
Industry data showed that the accrued shortfall as of June was already N845.2billion while it remitted zero to FAAC.
Although it would no longer remit to FAAC, the transition of NNPC to a limited liability company is expected to increase the revenue base of the government.
As stipulated in the PIA, where the NNPC Limited has a participating interest or 100 percent interest in a lease or licence, it shall pay its share of all fees, rents, royalties, profit, oil shares and taxes and any other required payments to the government.
At the unveiling, Kyari stressed that the company is positioned to lead Africa’s gradual transition to clean energy by deeping natural gas production to create low carbon alternatives and positively change the story of energy poverty locally across the world.
Kyari boasted that the Company would soon emerge the fifth-largest gas-producing in the world, adding that the new legislation would provide business opportunities that would enable it to earn more revenue for the country and attract foreign direct investment into the energy sector.
The company is also expected to enter new investments and partnerships in upstream assets to increase gas production in line with the decade of gas agenda.
For instance, in January 2022, the Company secured a $5 billion corporate finance commitment from the African Export Import Bank (AFREXIM Bank), to fund major investments in Nigeria’s upstream sector.
The fund would enable it to acquire and operate producing oil and gas assets in Nigeria.
Under the arrangement, the Company is expected to raise between $3.5 billion and $5 billion as corporate finance to fund major upstream investments through its funding strategy for selected upstream investments.
Experts speak
Speaking on the development, Dr Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), said the transition would now absolve the state-owned oil company from political interference and bureaucratic bottlenecks.
“We will see an NNPC that is independent and autonomous and an NNPC that would be decoupled or insulated from political interference and bureaucracy,” Yusuf said.
He averred that with the amount of assets owned by the Company, tax payments on these assets may likely surpass its remittances to FAAC
“Because of the amount of assets the NNPC has, either oil and gas assets, the kind of revenue that will be coming from taxes is likely to be more than the amount they remit monthly to FAAC.
“That is if they allow these things to go through because it is a major transformation they want to do,” he added.
Also, spokesperson of the Independent Petroleum Marketers Association of Nigeria(IPMAN), Mr Chinedu Ukadike, on the implication of this on oil marketers said the move was a welcome development as it positions the NNPCL to make more profit.
However, he said marketers are now challenged to compete with the Company since it now plans to expand its retail outlets from over 500 to 1,500 in six month.
“It is a challenge for us to be able to compete with NNPC as a company because it will now go aggressive into more retail, acquiring more filling stations and aggressive marketing and competition with major marketers.
“We get our products from the NNPC and if NNPC as a Company is now into marketing, you will see the adverse effect. It means that we won’t be able to compete with them but we will arm ourselves to be able to compete,” he said.