NNPC Ltd: The economic foster child of restructuring

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One common adage is “it is better late than never”! This is exactly what happened to our national cash cow that has been providing the national milk. The establishment of the Nigerian National Petroleum Corporation, NNPC, as a state-owned enterprise, was supposed to be a multinational corporation like its peers like Petronas of Malaysia and Petrobras of Brazil. Initially, when Nigeria was working, before the almighty Brentwood institutions suffocated our national policy formulation and implementation, NNPC was the darling of any engineer in the world, just like our first- and second-generation universities were to any professor, as well as our hospitals to any medical doctor and patient world over. Like everything Brentwood institutions confront in developing countries, the NNPC derailed and has never got its base till today, and may never get it even with the rebranding, because everything was done hurriedly rather than professionally.

The re-branding of the NNPC from a state-owned enterprise to a limited liability, and profit driven one, was supposed to impress the world of oil and gas, or at least the African oil and gas market, but it did not. The day President Muhammad’s Buhari re-branded the NNPC, beside Nigerian media, no international media carried that story! Even African countries like Niger Republic bothered not about fuss in Nigeria (the giant of Africa). This clearly tells us how serious we are taken in the 21st century Africa.

The old NNPC was the nation’s cash cow, thus, which cow is going to replace the old NNPC in providing the cash that both the almighty federal government, 36 states and 774 local governments share every month in Abuja? This is the question begging for answer from our politicians and their allies milking the old NNPC. This is how smart our politicians are. They blindly and hurriedly passed the Petroleum Industry Act, PIA, (thinking they are settling scores with their perceived enemies), forgetting what will replace the cow they are letting loose in the bush. Neither the federal nor the state governments are ready for an alternative source of a new national cow like the old NNPC. Besides Lagos state, no state in Nigeria will be able to stand to this economic reality, which is welcome development. Henceforth, foresight-deficit politicians will be relegated from the political scene, as any person vying for any office has to critically crack their brains for sources of revenue to manage their constituencies.

The old NNPC is well known internationally for its unserious management of human and financial resources, this one single characteristic of NNPC put the new NNPC Limited in a serious dilemma of getting international reputable investors. It is curious that neither Buhari nor the new NNPC Ltd management made any indication of global oil and gas players that are interested in investing in the rebranded corporation! Why? This is one simple question that does not have a one straight answer, even if there is, no one is willing to provide the answer, especially in public domain. It is a global norm that when giant state-owned enterprises like our old NNPC are rebranding, there are lots of would be grooms that are more than willing to inject the much-needed liquidity as well as the technological expertise needed. But in the case of our newly branded NNPC Ltd, it was completely mute from the international oil and gas arena.

With the current crisis between Russia and Ukraine, it was a golden opportunity for Nigeria to draw good international investors for NNPC Ltd. For example, the Russians will be more than ready to come in, they are already in Ajaokuta Steel. The Chinese too, will be more disposed to investing. Neither the federal government nor the old NNPC and the new NNPC shopped for prospective investors from either of these countries. The Nigerian government should utilise the opportunity of having Dr. Mansur Mukhtar vice president of the Islamic Development Bank to attract Arab investors to the new NNPC. According to Punch newspaper, NNPC is valued at N50 trillion (roughly, $117.64 billion, at 425 exchange rate of dollars). By utilising the opportunity of having Mansur Mukhtar, the new NNPC will solidify itself and have good footprints in the Middle East; the global hotspot of oil and gas.

It is on record that 2020 was the only good financial year for NNPC in more than four decades of its existence; it was the only year NNPC ever made profit. Thus, we have serious problems here. Nobody will take the new NNPC seriously with cantankerous records! One question now is, how is the new NNPC going to survive under this kind of business culture? This culture resulted from several factors, which are typical of the Nigerian business environment, and to some extent developing countries in general. This culture seems not to change at the NNPC, because after the newly rebranded NNPC Ltd dawned on Nigerians, the new chief executive said “…comprehensive expansion plan to grow its fuel retail presence from 547 to over 1500 outlets within the next six months.” Thus, the whole new NNPC is more interested in increasing the number of retail gas stations, rather than building refineries! And more interested in competition with AA Rano, Ashafa, etc., than competing with Dangote and BUA. The new NNPC is here to bring the same sorrow as the old one, as they say “old wine in new bottle”.

The new NNPC should kindly focus on refinery business in Nigeria and environmentally friendly countries, particularly in Africa where they will have more edge. The retail business should focus in African and Asian countries if the new firm really means business because through this, a lot of foreign exchange will be flowing into the country. One would imagine Nigeria with Dangote refinery, BUA refinery, and new NNPC with at least one, and the same capacity as Dangote’s. This will make Nigerian industrialisation wheels to move northward, unemployment will decline from the value chain of these refineries. But, retail stations are too small for the new NNPC. Period. The new NNPC needs to focus on the trans-Sahara gas pipeline and ECOWAS gas pipeline rather than mere retail stations, particularly now that the EU is calling for a source of gas alternative from Russia.

One pertinent aspect of the coming of the new NNPC is the global shift from fossil fuels (which is the primary area of focus for the new NNPC) to renewable energy, which the new NNPC is having little expertise in. Renewable energy is the dominant factor in global energy affairs of today, thus, the new NNPC cannot run away from it. Honestly, if the new NNPC is devoid of the Nigerian factor of doing business, it will have a good edge in that area. There is abundance of renewable energy sources at its door steps. While the new NNPC must look into renewable energy for it to survive the 21st century competition, refusal to venture into renewable energy is calling for its extinction.

With the new NNPC, revenue accruing to the federation account will be deflated. Thus, how will the shortfall be made up? This is a million-dollar question. Our politicians are cornered now to provide alternatives to the shortfall from the creation of the new NNPC. For a long time, our politicians have been too dormant to crack their brains in managing the scarce resources at their disposal, particularly generating new sources of revenue. Would this shortfall of revenue generation from new NNPC force our politicians, particularly those from the North, to accept the long clamour for “restructuring”?

Where would this new NNPC lead? For sure, the new NNPC will lead to drastic changes in the Nigerian public finances. Most probably it will lead us to that dreaded nomenclature-restructuring. As all the tiers government become short of finances, it is either to amend the PIA back to old order, or all the governments will be forced to look inward, which most don’t know how to. Amending the PIA will be resisted like not seen before, both domestically and internationally. Thus, PIA has created another monster that we have been running away from. Hope Nigeria can stand the pressure due to insecurity in the country.

Abdullahi writes from London, UK via [email protected]

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