There is hardly a shortage of stories about companies on the receiving end of Nigeria’s stuttering economic growth, more often than not, success stories about others who have weathered the storm manage to slip away.
One of such success stories is that of Nigerian Independent Petroleum Company (NIPCO) Plc, an oil and gas firm with principal activities in Depot, Liquefied Petroleum Gas (LPG), Compressed natural gas (CNG), Upstream, and Retail business activities.
The firm’s stellar performance means the company has bolstered the optimism of investors despite the snail pace of Nigeria’s GDP growth rate, owing to two economic recessions in just five years.
Also, the country’s inability to wean itself off petrol subsidies and Nigeria’s decrepit infrastructures such as the menacing Apapa gridlock and bad roads has continued to undermine the growth of downstream oil and gas firms that incur additional haulage cost.
Amid these monumental or huge challenges, NIPCO continues to thrive as it recorded a 29 percent increase in its revenue to N298.9 billion in 2021 from N288.6 billion in the previous year.
“The headwinds of international crude oil prices with its attendant effect on refined petroleum products had continuously increased levels of subsidy on petrol while the local price of petrol remained the same all through 2021 while that of Automotive Gas Oil (AGO) and LPG was going up,” Suresh Kumar, NIPCO’s managing director, said.
Concerning its Liquefied Petroleum Gas (LPG) business, NIPCO recorded a 49.1 percent increase in revenue from N52.5 billion in 2020 to N78.3 billion in 2021.
Kumar believes fluctuations in LPG’s product prices due to the rising price of crude oil in the global market were a major threat to the affordability of LPG in the domestic market.
“The Federal Government’s efforts in ensuring that LPG prices are within the reach of the populace to increase usage is commendable as the National Gas Expansion Programme (NGEP) is making giant strides to improve local supplies and save the nation considerably some ancillary costs in LPG import costs,” he added.
NIPCO’s revenue from the lubricant business increased by 36.4 percent to N1.5 billion in 2021 from N1.1 billion in 2020 while revenue from AGO business declined by 7.9 percent to N94.6 billion in 2021 from N102.8 billion.
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Bold ideas with Auto gas
Determined to the global gospel of a world turning away from petrol to Compressed Natural Gas (CNG), NIPCO Gas Limited, (a subsidiary of NIPCO Plc) and Femadec Express entered into a partnership to increase the usage of Compressed Natural Gas (CNG) to power vehicles in Nigeria.
The partnership would see Femadec leverage on NIPCO Gas capacity and autogas distribution network in several states of the federation.
Already, NIPCO is planning to reach over 10,000 vehicles to run on gas this year, while Femadec is planning to expand its fleet to 100 buses and expand its routes to other regions of Nigeria.
“This collaboration would enable an enhanced service delivery that will in no small measure, contribute to the achievement of the nation’s expansion programme and the success of the autogas policy,” the assistant General Manager, Corporate Affairs, NIPCO Plc, Taofeek Lawal, said.
According to him, NIPCO Gas currently has retail CNG dispensing facilities at Ibafo, Benin, Ajaokuta, Okene, and Abuja where it currently dispenses AutoCNG to over 7,000 vehicles.
He added that the gas firm is the only Nigerian company that has state-of-the-art workshops at Benin City, Ibafo and Abuja, for conversion of vehicles to dual fuel usage, with an inventory of conversion kits for all makes of vehicles.
He said plans are underway to build additional 45 AutoCNG stations across the country.
Most of these stations, according to him, will include workshops for the conversion of vehicles.
Experts in Nigeria’s oil and gas sector say converting cars from petrol to Natural Gas Vehicles (NGV), a campaign Egypt has taken head-on and making progress with, is a necessity that can reduce Nigeria’s exposure to an opaque subsidy regime.
They have noted that despite the high cost of conversion kits for CNG, its utilisation can help Africa’s largest economy leverage its 600 trillion cubic feet of natural gas reserves, cut down excessive addiction for fuel demands and convert the country from an oil to a gas giant in the template of Australia or Qatar
Resilient financial performance
Despite the marginal increase in cost of sales by 2.4 percent to N278.2 billion in 2021 from N271.6 billion, NIPCO recorded an increase in gross profit by 22.4 percent to N20.8 billion from N17 billion.
Other income increased by 5.9 percent to N3.6 billion in 2021 from N3.4 billion in the previous year.
Its operating profit marginally declined by 3.8 percent to N5.1 billion from N5.3 billion in 2020.
Its finance costs declined by 14.3 percent to N1.8 billion in 2021 from N2.1 billion in the previous year, while finance income increased by 1027.5 percent to N778 million in 2021 from N69 million in 2020.
Overall, NIPCO Plc has recorded steady growth in revenue and profit in the last five years. It recorded a revenue of N171 billion in 2016, which jumped to N280 billion in 2019 and further to N288 billion in 2020, despite the impact of the COVID-19 pandemic.
Profit before tax followed a similar growth trajectory, rising by 28 percent to N4.1 billion in 2021 from N3.2 billion in the previous year, an increase from N2.9 billion in 2019, and N2.2 billion in 2016, while profit after tax (PAT) was at N2 billion, a 25 percent increase from N1.6 billion in 2020, up from N1.4 billion in 2019.
In line with its determination to ensure value for shareholders, NIPCO Plc increased its dividend payment to 325 kobo from the status quo of 300 kobo per share it paid each year in the past five years, while earnings per share also increased by 20.1 percent, from 892 kobo in 2020 to 1071 kobo in 2021.
NIPCO’s cash flow increased by 10.8 percent in 2021 to N16.4 billion, from N14.8 billion in the previous year, while its total assets grew by 4.9 percent in 2021 to N226 billion from N215.4 billion. Likewise, its liabilities increased by 6.5 percent to N149.2 billion from N140.1 billion.
Outlook
Kumar is optimistic that, notwithstanding the enormous challenges in the industry, there will be better prospects in 2022.
According to him, with the PIA implementation and attendant reforms, especially the deregulation of the downstream sector, 2022 will be a very significant year for operators in the hydrocarbon industry.
“Kudos to the Federal Government for enacting the Act, which hopefully will support the growth of the hydrocarbon industry.”
“We hope to harness the business opportunities in the country and significantly expand our investment in the industry within the framework of the right operating environment, which is key in boosting investors’ confidence,” Kumar said.
