BusinessDay

Why NNPC didn’t grow like OPEC peers – Ex-top executive

Nigeria’s state-owned oil company did not grow like many other national oil companies (NOCs) established about the same time because of government interference, a former top executive of the then Nigerian National Petroleum Corporation (NNPC) has said.

Godswill Ihetu, who retired from NNPC in 1999 as group executive director, engineering and technical services, said government interference frustrated and retarded the growth and potential of the petroleum industry in Nigeria.

The former managing director of Nigeria LNG Limited, in his new book titled ‘From Oloibiri to Bonny’, said the NNPC was denied the opportunity of being guided and operated under a long-term sustained vision.

Ihetu joined Shell-British Petroleum at the age of 18 in 1959 as a trainee technician and later joined the Nigerian National Oil Corporation, the precursor of NNPC in 1974 as one of the foundation staff members.

He said the lofty expectations for the NNOC as envisaged in the 1970-1974 National Development Plan stated that “the overriding strategy should be to employ crude petroleum to transform the country into a modern state – technologically and industrially.”

He said the vision of the government for the petroleum industry was to use investment in oil to achieve technological adaptation and development through aggressive human resource development in the petroleum and related sectors.
Read also: NNPC, others lose $933m to production shut-ins in June

Ihetu said: “To some extent these expectations were met, but much more could have been achieved if, from inception, NNOC had not been dogged by overbearing government interference.

“It was not allowed to fulfill its original mandate as a national oil company like those of other OPEC countries, not to talk of operating in the mode of international oil companies.”

He recalled that the NNOC was set up with an eye on the private sector of the international petroleum industry, saying remunerations and conditions of service were benchmarked on their standards.

“Unfortunately, it was not allowed to find its feet before senior civil servants in the Ministry of Petroleum persuaded the federal military government to merge the Ministry of Petroleum with NNOC in 1977,” Ihetu said.

He said the result was that NNPC became a government parastatal, rather than a commercial business. “It was then managed predominantly by civil servants, who had no experience in managing commercial entities in the industry,” he added.

He said momentum was lost when ministers came with their own political and regional agendas, not focusing on the growth of the company.

Ihetu said: “In later years, privilege and patronage crept in. NNPC was therefore dogged by lack of shared long-term vision that would have allowed for sustained growth and continuity. This was completely at variance with the strategies employed by successful NOCs all over the world; which were independent, commercial, accountable and efficient.

“In spite of all these limitations and constraints, one would have to commend the work of the pioneers, who achieved much in spite of overbearing political interference. NNOC achieved a great record by making a number of commercial oil discoveries in shallow offshore assets within four years of being operational.”

He said the pioneers at NNPC built many oil infrastructures and facilities in short order, and operated them efficiently “until government control brought the NNPC to the present level and reputation.”

The octogenarian said Warri, Kaduna and Port Harcourt refinery projects as well as nationwide pipelines and depot projects were executed without a hitch and operated at full capacity in the early years.

He said unqualified personnel were sometimes injected from outside the organisation, adding that sometimes the organisation would not have a governing board.

He said: “For some periods during its lifetime, NNPC operated without governing boards. Heads of state and ministers were governing the affairs of NNPC. Good corporate governance was alien and unknown, so were transparency and accountability. Some contracts were awarded without competitive tender to favoured and politically connected contractors.

“Sometimes, NNPC managers, fearing the power and the connection of those contractors to powers that be, were unable to supervise them by the book. Without doubt, government interference frustrated and retarded the growth and potential of the petroleum industry in Nigeria.”

Chief executives were changed frequently, resulting in instability, laxity and lack of focus at the ministry and NNPC, according to Ihetu.

He said: “Even where there was a board, government could directly interfere in the affairs of the organisation, bypassing the supervising board. In fact, throughout my four-year tenure as Group Executive Director at NNPC, no board of directors was constituted. It was like ‘direct rule’ by the Head of State and the minister in those situations.

“Even when there was a proper board of directors, like in the early years of NLNG, the government still threw its overbearing weight around. For example, even though NLNG was not wholly owned by the government, and in fact, had a Shareholders’ Agreement that tried to insulate the company from government interference, the government still dismissed the boards twice within a period of three years, without bothering about its consequences.”

He said the poor performance of NNPC in maintaining the operations of the refineries and nationwide pipelines and depots facilities, which were left inoperable for several years due to utter neglect, had its roots in frequent changes at the CEO level.

“In this area of abandoning facilities for years, NNPC probably held the world record. The tragedy is that these failures were not due to the incompetence of managers and staff but due to governments that did not pay sufficient attention to provide sufficient funding and sometimes dictated who does what for services to the corporation,” Ihetu said.

In August 2021, NNPC announced that it was making a profit for the first time in 44 years.

“It is no surprise because NNPC never operated like a business or commercial entity. It was often called upon to intervene in social services such as the petroleum product subsidies that have been in place for decades, and the policy of uniform pricing of petroleum products nationwide,” Ihetu said.

He said with the enactment of the Petroleum Industry Act, which requires that NNPC to operate as a commercial entity, the company has the opportunity to be successful.

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