The non-publication of financial accounts and refusal to disclose contracts signed with oil companies may be justifying public sentiments that the Nigeria National Petroleum Company (NNPC) Limited is the world’s most opaque oil company.
NNPC Limited is the country’s major foreign exchange (FX) earner as West Africa’s biggest economy strains to diversify its revenue-generating sources.
Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria (CBN) from June 2009 to February 2014, first adjudged the NNPC as the ‘most opaque oil company in the world.’
The vocal economist slammed the NNPC for allegedly failing to remit enough FX into the government coffers. He further knocked the national oil company for keeping its many joint ventures, oil-backed loans and other shared production arrangements away from Nigerians.
“Why is there no dollar coming in? Why is the NNPC not able to bring in dollars? I am sorry this is the question that cost me my job and I will continue asking this question until NNPC fixes it up or until I die. Where are the dollars?” Sanusi said on December 7, 2023.
His claim appears justifiable, according to analysts. The NNPC, which is in talks over another oil-backed loan to boost its finances, agreed three years ago to buy 20 percent shares for $2.7 billion in the 650,000 barrels per day Dangote Refinery.
The NNPC’s shareholding in the Dangote Refinery has been whittled down to 7.2 percent from 20 percent earlier reported, after failing to pay the balance of funding owed.
The NNPC has kept details of the transaction to its chest, and it has not disclosed to the Nigerian people the basis of the valuation.
Petroleum contracts set out the legal framework for oil and gas projects. When they are published, it allows for public scrutiny but previous governments have balked at disclosing them, claiming it could expose company secrets, give undue advantage to competition and violate contract terms.
Deji Adeyanju, an Abuja-based lawyer, said the lack of transparency surrounding NNPC’s decision is deeply troubling.
“There has been little or no detailed explanation provided to the public regarding the reasons behind the reduction in NNPC Limited’s shares,” Adeyanju said.
Read also: Why NNPC Ltd’s stake dropped to 7.2% in Dangote refinery — Official
He added, “Was this decision driven purely by financial constraints, or were there other factors at play? The absence of clear, comprehensive communication from NNPC fuels suspicion and erodes public trust in our institutions.”
Africa Oil+Gas Report, an energy intelligence publication, said: “NNPC has behaved like a chokehold on the Nigerian economy.”
It added: “Without a solid set of achievements in getting crude oil and gas out of the subsurface by its own competence, the recourse is grandstanding, like the press release on the AFREXIM bank loan, and barefaced lies about what the company is doing with or without its partners,” the report said.
It added, “In the face of the crash in crude oil output and steep drop in the Naira’s value, NNPC’s position ought to be, how can we find a way to add 300,000BOPD to production volumes within the next six months? That should be its valid concern, not financial engineering announcements.”
Olisa Agbakoba, senior partner at Olisa Agbakoba Legal, faulted the existing governance model in the Nigerian oil and gas sector.
Agbakoba argued that the NNPC’s dual role as both regulator and operator creates conflicts of interest and inefficiencies within the oil and gas sector.
“The current structure of the NNPC inherently creates challenges,” said Agbakoba. “As both a player and a referee, the NNPC faces inherent conflicts and struggles to effectively regulate itself.”
Last year, Saudi Aramco declared a profit of $160 billion, the largest ever by a publicly traded firm. The NNPC, Nigeria’s equivalent of Saudi Aramco, blamed petrol subsidy for its inability to remit enough of the proceeds of oil sales to fund the government’s budget.
Experts say the petrol subsidy may have crept back in due to the rise in oil price and the naira depreciation but it doesn’t absolve the NNPC of its lack of transparency.
The Nigeria Extractive Industries Transparency Initiative (NEITI), an industry watchdog, said the NNPC did not remit over $2 billion to the federation account in 2021 before transitioning to a commercial venture.
This $2 billion consists of $722.596 million in unremitted dividends from the Nigeria LNG, $286.4 million of unremitted crude oil export sales, $871.145 million of unremitted domestic crude sales, $24.332 million of unremitted transportation revenue, $45.758 million of unremitted domestic gas proceeds and $859,583 of miscellaneous revenue.
NEITI also showed in the same year that the NNPC failed to remit $2 billion, and Nigeria’s oil and gas industry generated $23 billion in revenue.
It said the portion of total revenue that was eventually available for sharing by the federation in accordance with the revenue allocation formula stood at $13.2 billion, representing 57.27 percent of total revenue.
Tunji Oyebanji, a senior energy analyst at a Lagos-based consulting firm, said of all the oil-producing countries, Nigeria is reputed to have the longest time span for making final investments, which says lots about our current system.
He added, “In the years past, only the best were employed into NNPC and those who got in were just as good as those employed by the international oil companies (IOCs). Not anymore.
“Political connections rather than capacity have become the qualifying criteria for doing business in Nigeria’s oil and gas sector,” Oyebanji added.
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