Recently, the Nigerian National Petroleum Corporation for the first in 43 years made public its Audited Financial Statement. In this write-up Olusola Bello examines the implication of the action of the corporation on the oil and gas industry.
The Nigerian National Petroleum Corporation (NNPC) did the unthinkable when on Thursday 11th June, 2020 it took a bold step to present its ‘2018 Audited Financial Statement’ to the Nigerian public. An exercise that is happening for the first time in 43 years of the corporation.
The oil and gas industry that is being led by the NNPC has been dubbed opaque because of the lack of transparency that has characterised the operations of the industry. It is believed that nobody other than the corporation itself knows how much Nigeria is actual earning from crude oil and other associated business activities. Because of this, the general impression Nigerians have been having about the corporation is very negative to put it mildly.
This is because the government has always been the reason why there has not been transparency in the corporation as it always breath down the throat of NNPC to finance projects that are outside the brief of the organisation. It is the government’s cash cow. Most often the corporation is asked to bring money to fund projects that was never budgeted for and it must obey.
But with this development it does appear that the organization is now beginning to listen to the cacophony of demands there is need to be more open in its transactions so that it can engender enough confidence among international and local investors.
To some of the operators in the industry this is a welcome development and they want the management of NNPC to be encouraged along this line so as to strengthen the confidence of stakeholders in the industry.
The presentation of the audited financial statements remains indelible in the annals of the Nigerian National Petroleum Corporation (NNPC). It was a day, in all intents and purposes, the National Oil Company begin to erased doubts about its total commitment to transparency and accountability in its business transactions as it published, for the first time, its comprehensive Audited Financial Statements (AFS).
Mele Kyari, the NNPC group managing director, in his maiden statement on assumption of office on 8 July, 2019, stated unequivocally that the corporation’s business dealings and governance, under his watch, would be accountable to the 200million Nigerians whom, he believes, are the true stakeholders of the company. Transparency, he explained then would be his watchword. He followed this pronouncement up by rolling out a programme known as TAPE – Transparency, Accountability, Performance and Excellence, which has become the operating guideline and a way of doing business in the corporation. He has therefore fulfilled this promise with this publication.
The full disclosure of the corporation’s books involved those of 19 Strategic Business Units (SBUs) and a Corporate Services Unit (CSUs), even as the NNPC affirmed that its 2019 Audited Financial Statement was already being prepared and expected to be ready in a couple of months.
For a company most maligned for opacity in recent past, the publication of NNPC’s books is a big deal. Any wonder that extractive industries watchdogs across the world have touted the feat as a glorious example worthy of emulation. Extractive Industries Transparency International’s (EITI) Executive Director, Mark Robinson, declared, no sooner than the NNPC AFS was made public, that the development came at a record time, commending the National Oil Company as setting a new standard of reporting.
In Nigeria, NNPC’s disclosure of its books has not gone unnoticed as organisations and individuals have also commented. The Nigeria Extractive Industries Transparency Initiative (NEITI) has described as laudable,the decision to make public its audited accounts. NEITI acknowledges that the development fulfilled a pledge made by Mele Kyari, to the management of NEITI.
NEITI Executive Secretary, Waziri Adio said the organisation welcomed the eventual fulfilment of the pledge and obligation, saying given NNPC’s antecedents and its prominent role in the sector and in the country, the publication of its audited accounts was positive, signaling more openness for the oil and gas sector and for Nigeria.
NEITI called on the corporation to go further by publishing its previous audited accounts and in open data formats so that the reports can be more accessible to citizens who are the shareholders of the corporation, saying NNPC should also strengthen and sustain its commitment to data mainstreaming and systemic disclosure.
Also reacting to this development, Governor of Kaduna Sate, Nasir El- Rufai, who lauded the initiative describing the NNP C boss as a “game changer” needed to move the corporation forward in terms of accountability and transparency. But the governor fears that the cabal would soon launch attacks on the boss.
In a statement El- Rufai commended the boss’s effort and his numerous achievements within the short period he has been in office.
While responding to a tweet of the Special Assistant to President Muhammad Buhari on new media, Bashir Ahmed, El-Rufai said: “Mele Kyari’s heart is in the right place! His tenure shall be the games changer that NNPC and Nigeria needs. He is competent, confident and rapidly plugging leakages, repositioning the Corporation towards greater transparency and accountability. The oil cabal will certainly attack him!”
On his part, Senator Bassey Akpan, Chairman, Senate Committee, Upstream, said the recently published Audited Financial Statements of the NNPC underscored the readiness of the new Management of the National Oil Company to pursue transparency, good governance and accountability in the Petroleum Industry.
In all, 19 entities of the corporation, registered under the Companies and Allied Matters Act (CAMA) as amended and the National Petroleum Investment Management Services (NAPIMS).
The 2018 NNPC’s AFS posted positives in many of the National Oil Company’s Upstream going concerns. A perusal of the AFS for the year ended December 31, 2018 of the National Engineering and Technical Company (NETCO), an Upstream subsidiary of the corporation, indicated a profit after tax of over N4.5billion, a remarkable improvement from the previous year record of over N2.4billion.
The AFS of the Nigerian Petroleum Development Company (NPDC) indicated a profit after tax of over N179.1billion which comes as significant improvement from the 2017 profit of over N157.4billion.
During the period, NPDC posted a revenue of over N1.3trillion compared to the 2017 revenue of over N882.3billion. The AFS indicated that the NNPC’s flagship subsidiary has a total asset of over N5.3trillion within the period, compared to the N4.007trillion asset recorded in 2017.
On its part, the Nigeria Gas Company (NGC) recorded a profit after tax of over N13.2billion with a comprehensive annual income of about N19.9billion. The AFS also valued the NGC total assets in 2018 at over N251.7billion compared to N196billion in 2017.
In the Downstream Sector, the Petroleum Products Marketing Company (PPMC), for the first time, recorded gross profit of N24.3billion in the year under review, while NNPC Retail Limited posted profit after tax of over N2.2billion compared to the N1.8billion recorded in the preceding year.
The National Petroleum Investment Management Services (NAPIMS) posted revenue of N5.04trillion in 2018 and profit of N1.01trillion, with total assets under the portfolio of the services unit valued at N18.6 trillion. NAPIMS, among others, manages the Joint Ventures contracts in the Upstream Sector on behalf of the government.
Integrated Data Services Limited (IDSL), an NNPC Subsidiary in charge of acquisition and interpretation of seismic data, posted a total comprehensive income of about N3.2billion with profit of about N154million within the period.
It is undeniable that the 2018 NNPC’s AFS revealed some challenges in the midstream subsidiaries of the corporation, most significantly, in the refineries located in Port Harcourt, Warri and Kaduna, where losses were recorded, unsurprisingly because of their long downtime. It is, nonetheless, reassuring that the corporation has commenced the process of a comprehensive diagnostic assessment of the refineries that would culminate into their thorough rehabilitation, starting with Port Harcourt and Warri Refineries. In addition, proposals to change the refineries’ business models to that similar to Nigeria Liquefied Natural Gas Limited’s (NLNG), which has been a success story over the years is also afoot.
It should also be noted that there existed a seemingly wide gap between NAPIMS revenue and profit for the year as contained in the NNPC’s AFS. Noteworthy, again, is the fact that NNPC and its partners are already considering modalities to cap crude oil production cost per barrel at $10 by 2021 in order to ensure that Nigeria benefits more from the nation’s hydrocarbon resources. This is a position which the NNPC Group Managing Director, Kyari, has made clear at every avenue.
The NNPC 2018 comprehensive AFS may not be a perfected report. There are not many perfect ones, Its being made available to the public, nonetheless, projects a significant progress in institutionalising transparency and accountability in NNPC, a bold move which, in many respects, is a worthy example for others to emulate, according to some industry stakeholders.