NNPC’s annual profit surges 135% to N674bn

Amidst the challenging operating environment that has tested the resilience of institutions and businesses globally, the Nigerian National Petroleum Company Limited (NNPC) has continued to weather the storm by posting its second straight annual profit of N674.1 billion.

NNPC revealed that its profit after tax grew by 135 percent to N674 billion last year from N287 billion in 2020.

The positive result is coming as global economies continue to struggle with the recessionary forces and weak economic outlook.

In spite of a tough and volatile operating environment, the NNPC’s investment strategy proved resilient and enabled the national oil company to deliver favourable outcomes as shown by the 2021 financial statement.

The NNPC’s Group Account was audited by PricewaterhouseCoopers, SIAO, and Muntari Dangana & Co.

Announcing the result on Tuesday in Abuja, Mele Kyari, group chief executive officer of NNPC, said: “Today I’m happy to announce that the Board of NNPC has approved 2021 audited financial statements.

“NNPC has progressed to a new performance level, from N287 billion profit in 2020 to N674 billion profit after tax in 2021, climbing higher by 134.8 percent YoY profit growth.”

The 2021 financial year made it the fourth consecutive year that the NNPC will be making its audited financial statement public. This was one of the innovations made by Kyari when he took over the helm of affairs of the national oil company.

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In 2020, when the NNPC first made public its audited financial statement, it said it posted a loss of N803.9 billion in 2018.

Furthermore, three components were responsible for the worst performance of the group ever. The increase in cost of sales, specifically increase in crude cost; increase the general and admin expenses, which almost doubled from N474 billion to N894 billion; and an increase in impairment of receivables and other assets in the year by almost 300 per cent.

When the NNPC Group Audited Account for 2019 was released, the loss position had reduced to just N2.3 billion.

But with the reforms implemented by Kyari, the loss position was reversed in the 2020 financial period when the NNPC posted its first profit in 44 years of N287 billion.

Since then, the company has bounced back to reckoning with an impressive financial performance of N674 billion in 2021.

The rise in profit is mainly occasioned by a significant increase in revenue and a less proportionate increase in the cost of sales resulting in 1,556.9 percent increase in gross profit.

Other factors that contributed to the high profitability of the NNPC are the outcome of the N173.7 billion arising from reconciliation with the Federal Inland Revenue Service, a stronger emphasis on performance management, rationalisation of non-essential expenditure and implementation of the transparency and accountability agenda.

The performance recorded by the NNPC was further bolstered by the positive impact of the N193 billion royalty, which was written back as a result of the reconciliation with the Nigerian Upstream Petroleum Regulatory Commission.

Similarly, the emplacement of aggressive cost control measures by the NNPC management as well as the successes made in the implementation of system-based controls on funds management also boosted profitability.

Further analysis of the NNPC Group Audited Financial Statement showed that revenue rose by 72.6 per cent to N6.42 trillion in 2021 as against N3.72 trillion in 2020.

The increase in revenue is attributable to improvement in the production and price of crude oil during the period under review.

The audited financial statement further revealed an increase of 2.6 per cent in total assets from N15.86 trillion in 2020 to N16.27 trillion in 2021.

Through efficient management of the affairs of the company, the audited financial statement also showed that total liabilities decreased by 8.3 per cent from N14.68 trillion in 2020 to N13.46 trillion in 2021.

In line with the growth trajectory of the current management, the shareholders’ fund position of the NNPC Group also followed an upward trend as it rose to N2.81 trillion in 2021 as against N1.15 trillion in 2020. This represents 144 per cent increase in shareholders’ funds as of December 31, 2021.

The cost of sales also rose by 46.3 per cent from N3.65 trillion in 2020 to N5.34 trillion in 2021. The increase in the cost of sales is attributable mainly to the increase in crude oil production.

The selling and distribution expenses also increased from N36b billion in 2020 to N52 billion in 2021. This increase is in line with the rise in revenue from petroleum product costs during the year under review.

The net impairment loss on financial assets dropped to N65 billion in 2021 as against the impairment reversal of N713 billion in 2020.

Since he assumed office, Kyari has pursued his Transparency, Accountability and Performance Excellence (TAPE) agenda, a five-step strategic roadmap for NNPC’s attainment of efficiency and global excellence.

Kyari, during the inauguration, had said pursuing TAPE was the only way to turn around the corporation and make it competitive.

Under the roadmap, the Transparency component of the agenda was aimed at maintaining a positive image, and sharing values of integrity and transparency with all stakeholders, while the Accountability segment of the campaign is to assure compliance with business ethics, policies, regulations and accountability to all stakeholders.

In terms of the two-prong item of performance excellence, Kyari has said the idea was to entrench a high level of efficiency anchored on efficient implementation of business processes, which would also emplace an appropriate reward system for exceptional performance among the workforce.