“Prof, good morning. What is the problem with Nigeria’s oil sector?” “You can’t know all the problems in Nigeria’s oil sector.” “All the regulators and the marketers in the oil sector are dancing around pricing of fuel.”
Dangote Refinery is giving regulators and marketers sleepless nights.” “Ah, my friend, you have to manage the oil sector very well. “If not, it will manage you.”
“Dangote is still discussing with the FG to sell crude oil in naira”
“Nigeria seems likely to miss out due to poor corporate governance within the NNPCL and rampant oil theft. This makes it challenging to secure funds for the country’s energy transition program. If Nigeria can’t resolve this fuel crisis, the future remains uncertain.” “Prof, I can see corruption dancing up and down in the entire oil sector.” “No, it’s a profit play!”
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A sector in denial and illusion
“This situation is not aligned with our national interests. Additionally, oil marketers are becoming increasingly aggressive.” “But Professor, as an intellectual elite, have you reviewed the 2023 Audited Financial Statements (AFS) of the NNPCL?”
“I have read it. Although it resembles a postgraduate thesis in terms of length—nearly 120 pages—the content left me disappointed. Why the disappointment? The disclosures are embarrassing. NNPCL is inadvertently admitting that it is not a going-concern entity but an illiquid one, able to declare profits only through revaluation gains despite having a significant amount of non-performing receivables.” “I beg, can you tell me more?”
“The company has been in poor health for about ten years or more; the model is broken. Then let the company undergo surgical operation in the operating theatre. Are you talking about reforming the company? Reform must be carried out only by external actors.”
“I have never seen a completely unreasonable financial statement in my entire life.” “Prof, please calm down!” “NNPCL has issued a press release that it is not owing.” “Anything that has to do with debt owed by NNPCL has been declared fake news.” “Don’t mind those guys, they are operating an oil sector in denial and illusion.” “You mean as an operator and a regulator?” “Some people should be in jail.” “Ah, Prof Please, calm down!” “You’re getting too emotional.”
“They simply have under performing assets.” “I mean resource draining assets!”
“But if they don’t even have the resources to further expand or maintain the assets. The assets can be sold now. Or, are the assets Beyond Economic Repair (BER)?”
“Prof, is the persistent fuel scarcity in Nigeria, despite its abundant crude oil reserves, a result of systemic issues within the upstream, downstream, and midstream segments of the oil sector? How did Nigeria end up with an oil industry that seems to perpetuate fuel shortages, corruption, poverty, illegal bunkering, pipeline vandalism, and black market activities, affecting over 200 million Nigerians?”
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At what price?
“Local marketers prefer importing fuel.” “That is unbelievable.” “Truly, it’s unbelievable that over 95 percent of petroleum product importers in Nigeria are not buying from the Dangote Refinery.” “As a result of this poor local patronage, dangote refinery exports most of its diesel and aviation fuel.”
“Don’t mind these local marketers. Whether they like it or not, Dangote Refinery will start supplying Premium Motor Spirit (PMS) to the public this September 2024. Let’s hope crude oil will be available to Dangote Refinery to refine.”
“I have been told that the NNPCL may not be able to lift petrol from Dangote Refinery on September 15, 2024 as planned.” “What could be responsible for the delay?”
“No commercial agreement on the product’s price.”
“Dangote is still discussing with the FG to sell crude oil in naira. This appears to be a good deal. Buy the crude oil in naira, then NNPCL is to buy the product back from the refinery in Naira.
“I read that marketers are still importing cheaper fuel between N900 – N940 per litre (landing cost).”
Prof, do you know that “Petroleum product marketers in Nigeria have written to President Bola Tinubu, complaining that the refinery’s local diesel prices — which have dropped from N1,200 to N1,000 and now to N900 per litre — are negatively impacting their businesses.” “I hope this is not fake news because Mr President is out of town.” “Or, is he back?”
“In all of this, no one is talking about supply of crude oil in Naira to other local refineries. I am only hearing about Dangote Refinery.” What’s actually happening?
“Prof, NNPCL challenges are daunting!” “Inflation and high cost of production of crude oil…high landing cost of fuel. Unrecoverable receivables and huge bad debts. Weak and moribund assets and ultimately, NNPCL can’t expand. Liabilities can’t be paid. Can NNPCL cope with these challenges? I don’t think so. Then, it’s finished!”
What’s next?
“Something must give. We can’t continue like this.”
“I am not happy with this NNPCL news.” Anyway, in case you don’t know, NNPCL has requested for a permanent seat at the Dangote Refinery as part of the crude oil deal. In a show of solidarity, it’s good to have at least one NNPCL liaison office in the refinery. “I won’t be surprised to hear that all security agencies have permanent seats at the Dangote Refinery so that all operations can be smooth and secure.”
“Increase in pump price of petrol has come to stay.”
“The fact is – a company that can’t deliver on promises and has kept moving the date of commencement of production from its refinery – already indicates that the leadership have forgotten about project management.” “Prof, please, avoid hate speech.”
Final words
“Prof, can we have your final thoughts on this matter?”
“You want me to tell you the truth.?” “Of course!”
“My brother let me tell you: “the sad truth is that the present leadership of NNPCL cannot move the company to a new phase or a prosperous one—the company has to be overhauled and broken into different semi-independent units with competent managers, devoid of the quota system, which is as much an albatross, and with Key Performance Indicators (KPIs) to monitor performance.”
“One would have expected the management team to turn in their resignations and take the honourable exit at this point.” “No Prof! Resign to where?” “Who will resign?” “Mark my word, no one resigns in NNPCL.” “The FG is not complaining. NNPCL management staff are government guys doing a great job for the government.” Thank you.
MA Johnson, Rear Admiral (Rtd).
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