Three years after envisioning to list on the Nigerian Stock Exchange (NSE), state-owned Nigeria National Petroleum Corporation (NNPC) has not made headway in this direction and the plan to list remains at best a mere wish.
The Federal Government had planned to list NNPC on the NSE after concluding reforms in the country’s petroleum sector, according to the draft National Oil Policy submitted to the Federal Executive Council (FEC) in November 2016.
According to the draft oil policy, “The NNPC will be made autonomous from the state, it will relinquish all its policy-making and regulatory activities, and it will be treated on an equal basis with private sector operators for projects.”
The draft policy further stated that the NNPC would cease to exist as a statutory corporation and as a legal entity and would be succeeded by National Oil Company of Nigeria (NOCN).
“The NOCN will be incorporated as a limited liability company; NOCN will be governed according to the governance rules of the Nigerian Stock Exchange prior to the listing of its shares, and by the rules of any bourse where its shares are eventually listed,” it said.
Three years after the plan was submitted and approved by FEC, however, BusinessDay findings indicate that the status quo remains as little or no structural change has taken place in the NNPC. The NNPC is still an opaque enigma, with analysts questioning the correctness of the figures the corporation prints as revenue to the Federation Account. There is also lack of clarity over what is really being proposed for listing.
“If you say you want to list the NNPC, is it the upstream or downstream segment?” asked Ode Ojowu, professor of economics and former head of National Planning Commission.
NNPC has subsidiaries in upstream and gas processing that include the Nigerian Petroleum Development Company (NPDC), Integrated Data Service Limited (IDSL), National Engineering and Technical Company Limited (NETCO), Nigerian Gas Company Limited (NGC), and Nigerian Gas Marketing Company (NGMC). These subsidiaries made N43.3 billion, according to figures from the NNPC’s operations and financial report for January 2019 actual, but this revenue was wiped off largely by the corporation’s downstream subsidiary operations which recorded deficits north of N32.1 billion.
“Understand that the four refineries we have were registered as independent companies and they still report to the NNPC. The NNPC needs to be unbundled first. The refineries need to be put in a competition mode,” Ojowu said.
Analysts agree that the decision to list NNPC is a step in the right direction. A listed NNPC will not only drive huge capital accumulation in Nigeria, it also means the country will count on market forces to determine oil production, retail price for products and proper deregulation of the oil sector.
Auditing and preparing the NNPC books for Initial Public Offer (IPO) implies showing the total and current disclosure of reserves capacity, total revenue, profitability, taxes, and other key metrics which are needed in modelling the profitability of NNPC plc and potential dividend it could pay to investors.
A listed NNPC will lift Nigeria’s oil sector out of recession and uplift the country’s oil and gas reserves which have remained stagnant or dwindling while oil production has been on a decline. It also means huge gas reserves estimated at 182 trillion cubic feet (TCF) could help feed power generation for energy-starved Nigeria. These reserves have largely remained undeveloped more than 20 years after they were discovered – due largely to NNPC’s inability to either fund the CapEx needed to develop the fields or let go of the fields for private oil firms to develop.
“Privatising state enterprises is an innovative strategy to catch foreign investors. It will help improve efficiency, provide financial relief, boost diversified ownership and increase the availability of funds for private sector,” said Olayinka Olohunlana, a Lagos-based economic analyst.
But Ojowu believes that to follow through with the NNPC listing, many outstanding issues need to be sorted out first.
“Many people are counting on Dangote Refinery. This is dangerous because we are creating a monopoly for an indispensable commodity. There are really many outstanding issues to be resolved first,” he said.
Ibe Kachikwu, former minister of state for petroleum resources, in an interaction with senior journalists in Abuja last week, said the NNPC was not yet ripe for listing as there was still a lot more work to be done.
“I have been telling the management of NNPC to enter a pre-listing mode. This does not mean it is happening any time soon but it involves publishing audited reports as at when due, with internal controls in place,” Kachikwu said.
NNPC is not the first state-owned oil company that has either proposed to list or listed. Brazilian state oil company Petrobras was created in 1953 and sold its first shares to the public in December 1957. It listed on the Ibovespa or Brazilian stock market.
The Brazilian government directly owns 54 percent of Petrobras’ common shares with voting rights, while the Brazilian Development Bank and Brazil’s Sovereign Wealth Fund each control 5 percent, bringing the state’s direct and indirect ownership to 64 percent. The non-state controlled shares are traded on BM&F Bovespa, where they are part of the Ibovespa index.
In September 2010, the company raised as much as $70 billion in the world’s largest share sale to help finance its $224 billion investment plan to develop newly discovered oil fields.
In Malaysia, Petronas, the state oil and gas company founded in 1974, was initially wholly owned by the government. Petronas has since listed at least three of its subsidiaries in the Bursa Malaysia or Kuala Lumpur Stock Exchange.
Other oil companies closely identified with the state but now listed on stock exchanges include Statoil of Norway and Gazprom of Russia.
Saudi Arabia also plans the mother of all IPOs for its state oil company Aramco. The IPO is the cornerstone of Prince Mohammed bin Salman’s economic programme to transform Saudi Arabia, dubbed Vision 2030. Saudi officials hope they will raise $100 billion by selling about 5 percent in the company, valuing Aramco at $2 trillion although the market is valuing it at $1 trillion.
STEPHEN ONYEKWELU & DIPO OLADEHINDE
