The Nigerian National Petroleum Company Limited is once again at the centre of a storm. In the space of a week, a parliamentary probe unearthed more details on its blurry operations; a state governor stunningly alleged that the last administration wasted $19 billion on the moribund refineries, and a public revenue agency accused it of withholding trillions from the national treasury. The NNPC’s cup is full; President Bola Tinubu should immediately kick-start the process of dismantling the corrupt, tottering behemoth and restructuring it into a value-adding and transparent national oil company.
Established 46 years ago, the NNPC has been notorious for befuddled accounting, waste, losses, rundown refineries, and non-remittance of cash due to the Federation Account. Unlike other national oil companies in the Middle East, Norway, China, and Russia, the company repeatedly incurs huge losses, cannot refine crude oil, or profitably maintain its other strategic assets. It endangers the country’s economic health because the oil sector provides 95 per cent of Nigeria foreign exchange earnings and 80 per cent of budget funding.
Tinubu’s risky market-oriented policies are not complete without a root-and-branch surgical operation at the NOC, where opacity and impunity reign. At the Seventh Wole Soyinka Centre Media Lecture Series in Abuja in July 2015, Nasir el-Rufai, immediate past governor of Kaduna State, summed up the country’s urgent assignment: “If you don’t kill the NNPC, it will kill Nigeria.”
The PUNCH has for long asserted that the company is so steeped in its wayward ways that it is unreformable. Its recent rebranding ostensibly in furtherance of the new Petroleum Industry Act, is cosmetic; it should be dismantled outright and a new, leaner, and accountable NOC, with some private sector participation established, and purely as a holding and investment group.
The NNPC’s “killer” mode was again highlighted by a House of Representatives’ committee that accused it of failing to transfer N2 trillion to the FA after the PIA came into effect in 2021. Former President Muhammadu Buhari unveiled a company worth $64 billion (N28 trillion at N450/$1), but only $58.8 billion, or N26 trillion was allegedly transferred.
Among others, the Reps alleged that equipment worth $250 million the company ordered for the Port Harcourt Refinery years ago have not been accounted for. The NNPC claims 25 subsidiaries, but on record, alleged the lawmakers, there are only 21. At N21.04 trillion, a subsidiary–the National Petroleum Investment Management Services–owns more assets than the parent company, which reported assets of N15.84 trillion in 2020, and N16.2 trillion in 2021. These discrepancies should be investigated speedily.
The Revenue Mobilisation Allocation and Fiscal Commission has also corroborated allegations by the 36 state governors that the NNPC withheld money due to the FA in 2022. RMAFC Chairman, Mohammed Shehu, said the NOC did not remit N8.4 trillion due from oil proceeds between January 2022 and May 2023.
The NNPC claims to have withheld the sum as “under-recovery” (petrol subsidy). As the sole importer of petrol for years, the NNPC determined the quantity consumed daily and the “under-recovery” it paid itself. Thankfully, Tinubu is ending that travesty.
Nasarawa State Governor, Abdullahi Sule, said the Buhari administration wasted $19 billion to rehabilitate the four state-owned refineries without result, the same amount Dangote has invested in its 650,000 barrels-per-day refinery. The Goodluck Jonathan administration had said it would borrow $1.6 billion for turnaround maintenance; under Buhari, the NNPC borrowed $1.5 billion, also for TAM.
Due to the NNPC’s mismanagement, Nigeria, the world’s 11th largest producer of crude oil, depends wholly on imported petroleum products to meet domestic demand because the NNPC-run refineries are comatose. Some 20 per cent of forex disbursed in the country goes to petrol imports. In contrast, state-owned oil companies refined 16.99 million bpd in China, 2.9 million bpd in Saudi Arabia, and 1.24 million bpd in Iran in 2022, Statista stated.
Singapore produces only 20,170bpd to rank 78th globally but refines 1.46 million bpd. Mercifully, Tinubu is also reportedly cancelling the corruption-ridden crude swap arrangement where the NNPC collects 445,000bpd to exchange for refined products.
In its defence, the NNPC cites subsidy payments and insecurity as its major drawbacks. It wanted the subsidies cancelled so that it can declare profits. During this period, it negotiated a tax credit of N1.53 trillion with the Federal Government to construct 11 roads covering 737 kilometres nationwide. Besides, it paid for a 20 per cent stake in the Dangote Refinery upfront. All this does not fully explain away the mess. Its 21 depots nationwide lie in ruins; consequently, it stores products with private depot owners at a high cost.
According to ResearchGate, Nigeria has a total pipeline network of 5,001km, but these are severely damaged. Vandals tap products and crude from them, resulting in the distribution of products through tankers, and consequently higher prices. NEITI said Nigeria lost N16.25 trillion to oil theft in the 12 years to 2021. The NNPC should exit the downstream entirely.
Nigeria imported petrol with $11.3 billion in 2021, says online data resource, The Observatory of Economic Complexities. Blackgold Energy Authorities said the total annual import bill for all refined products has soared to $28 billion. Subsidy bill was N3.7 trillion from January to June 2023. In 2011, Nigeria scandalously incurred N2.53 trillion on subsidies for real and fictitious products, a National Assembly inquest discovered.
Oil industry experts complain that NNPC is the only major oil company in the world that sells all its crude through middlemen, fuelling illegal arbitrage and corruption. The company also allegedly maintains secret accounts.
It declared a N287 billion profit in 2020 on revenues of N3.4 trillion, and N674 billion in 2021 from an income of N6.42 trillion, Kyari said. It had hitherto posted losses for decades. In 2015, it recorded losses of N770.18 billion, N119.03 billion in 2016, and N803.14 billion in 2018.
Compare with its peers; with a market capitalisation of $1.8 trillion, Saudi Aramco made a profit of $161.1 billion in 2022. The US Energy Information Administration said Iran’s oil companies recorded profits of $15 billion in 2020 and $40 billion in 2021.
The NNPC in its present form has outlived its usefulness. The global trend is to reduce the government’s stake in SOEs. Therefore, dismantling and reforming the NNPC should be a top priority for Tinubu. His party promised to do this in 2015, but on assuming office, Buhari promptly reneged. Tinubu, who cancelled petrol subsidies in his first moments in office on May 29, should be different.
He should sweep away the top management to make way for unfettered and thorough audits. He has done this in the CBN and the EFCC; doing so at the NNPC is also very urgent.
Tinubu should send a PIA amendment bill to NASS post-haste to replace the NNPC with an investment company and a holding company. The NNPC should exit from the downstream totally and leave it to the private sector. Other countries can, but Nigeria has proved that its government cannot run commercial enterprises. It should restrict itself to regulation.
With 17.9 million bpd capacity, the United States is the largest crude oil refiner in the world, but the US government does not own any of these assets. Here, the NNPC is both regulator and operator with negative results.
Tinubu must privatise the refineries with speed as the lack of domestic refining was the main cause of the subsidy regime, and to foster competition downstream and avoid a Dangote monopoly.
As el-Rufai presciently advised eight years ago, Tinubu should terminate NNPC before it terminates Nigeria.
