The Nigerian National Petroleum Company (NNPC) Limited has enormous potential to drive Nigeria’s economic transformation. NNPC has also demonstrated significant financial growth in recent years, reflecting its pivotal role in Nigeria’s oil and gas sector. As of 2023, NNPC’s total assets were valued at approximately ₦246.8 trillion (over $300b), a substantial increase from ₦58.48 trillion in 2022. NNPC is estimated to be worth over $370b by the end of 2024 and has the potential to be the largest African company by market value if listed on the Nigerian Stock Exchange. Regarding profitability, NNPC reported a net profit of ₦3.297 trillion for the 2023 financial year, representing a 28 percent increase from the previous year.
While these figures provide insight into NNPC’s financial standing, determining the company’s exact market valuation is complex. Market valuation typically considers asset base, revenue, profitability, market conditions, and investor sentiment. For context, in 2013, NNPC’s oil revenue was estimated to be worth $41 billion and could reach $51 billion in 2024, constituting a significant portion of the government’s revenue stream.
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It’s important to note that NNPC’s valuation is subject to change due to fluctuations in global oil prices, operational efficiencies, and strategic initiatives. Additionally, as NNPC continues to implement reforms and considers potential privatisation or public listing, its valuation will be influenced by market perceptions and investor confidence.
While precise valuation figures can vary, NNPC’s substantial asset base and profitability underscore its significant value within Nigeria’s economy and the global oil and gas industry.
Despite some financial irregularities, the Nigerian National Petroleum Corporation (NNPC) has been a cornerstone of Nigeria’s economic development, managing vast oil and gas resources. However, its legacy of inefficiency, lack of transparency, and suboptimal performance has hindered its ability to fulfil its potential as a national asset. By adopting a strategic pathway of gradual privatisation and eventual listing on the stock exchange, modelled after Saudi ARAMCO, NNPC can foster a culture of efficiency, effectiveness, transparency, integrity, drive, accountability, and agility. This transformation is essential for the corporation’s growth and Nigeria’s broader economic prosperity for the present and future generations.
Setting the foundation for transformation
To embark on this ambitious journey, NNPC must redefine its purpose, values, and goals. The following steps will serve as the cornerstone:
Adopt a new corporate vision: Reframe NNPC’s mission to align with global best practices in corporate governance, operational excellence, and sustainability.
Legal and structural reform: The Petroleum Industry Act (PIA) of 2021 is a significant milestone. It restructured NNPC into a limited liability company, NNPC Limited. This provides the legal framework for operating with financial independence and transparency.
Embedding a culture of efficiency and effectiveness
Efficiency and effectiveness can be achieved by optimising operations and aligning them with measurable performance standards:
Operational streamlining: Reduce waste and bureaucracy by implementing lean management principles.
Technology integration: Leverage advanced technologies like artificial intelligence, data analytics, and blockchain to enhance exploration, production, and administrative processes.
Human capital development: Invest in training and capacity-building programmes to create a skilled workforce that embodies the corporation’s new values.
Transparency and integrity as core values
Transparency and integrity are essential to building public trust and attracting investors.
Financial audits: Conduct comprehensive financial audits by reputable international firms to ensure accountability.
Public disclosure: Regularly publish audited financial reports, operational data, and key decisions to demonstrate a commitment to openness.
Ethical leadership: Instill a zero-tolerance policy for corruption and establish whistleblower mechanisms to detect and address misconduct.
Accountability through governance
Accountability is the bedrock of any successful privatisation effort.
Independent board of directors: Appoint a diverse and professional board with no political interference, ensuring decisions are driven by merit and long-term strategy.
Performance metrics: Develop and monitor clear Key Performance Indicators (KPIs) to evaluate progress and enforce accountability at all levels.
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Agility and drive for growth
Agility enables NNPC to adapt to changing market dynamics, while drive ensures a relentless pursuit of excellence.
Decentralised decision-making: Empower regional offices and subsidiaries to make faster, localised decisions.
Market responsiveness: Regularly review and adjust strategies to align with global energy trends, including the shift towards renewable energy.
“While precise valuation figures can vary, NNPC’s substantial asset base and profitability underscore its significant value within Nigeria’s economy and the global oil and gas industry.”
Gradual privatisation and stock exchange listing
Privatisation must be approached gradually to minimise risks and maximise stakeholder buy-in:
Asset valuation and risk mitigation: Conduct a comprehensive valuation of assets and address liabilities.
Pilot private equity participation: Introduce partial privatisation by selling minority stakes to private investors, ensuring the government retains strategic control.
IPO preparations: Prepare for an Initial Public Offering (IPO) by meeting international listing requirements, such as transparent corporate governance, financial audits, and market readiness.
Dual listing strategy: While listing on the Nigerian Stock Exchange ensures local participation, dual listing on international exchanges (e.g., NYSE or LSE) attracts global investors.
Learning from ARAMCO’s experience
Saudi ARAMCO’s successful transformation provides valuable lessons for NNPC:
Gradual implementation: ARAMCO phased its privatisation, initially selling only 1.5 percent of shares in its IPO. This gradual approach ensured market confidence and stability.
Clear communication: ARAMCO effectively communicated the benefits of privatisation to citizens and stakeholders, ensuring widespread support.
Diversification: ARAMCO is committed to diversifying its revenue streams, including renewables and downstream operations investments.
Benefits of the transformation
Transforming NNPC through privatisation and listing will yield significant benefits:
Increased revenue: An IPO can generate billions of dollars for national development projects.
Enhanced efficiency: Private sector participation will drive innovation and eliminate inefficiencies.
Accelerated economic growth: Funds raised can be reinvested in building much-needed infrastructure, boosting Nigeria’s reserves while diversifying its economy, reducing dependence on oil revenue, and stabilising the local currency.
Global competitiveness: A privatised and agile NNPC can compete with global energy giants, projecting Nigeria as a leader in the energy sector.
Read also: NNPCL remitted N10trn to federation account in September 2024 -Kyari
Overcoming challenges
The pathway to transformation will face obstacles, including political interference, resistance from vested interests, and public scepticism. Addressing these challenges requires:
Strong leadership: Appoint visionary leaders who can navigate complex reform processes.
Stakeholder engagement: Build consensus through transparent communication and inclusion of diverse perspectives.
Policy stability: Ensure a stable regulatory environment that supports privatisation efforts.
In conclusion, transforming NNPC into a privatised, publicly listed entity is not merely an economic initiative but a national imperative. By fostering a culture of efficiency, effectiveness, transparency, integrity, drive, accountability, and agility, NNPC can become a globally competitive energy company, a symbol of Nigeria’s economic potential. Through gradual privatisation and adherence to best practices, NNPC can emulate Saudi ARAMCO’s success, unlocking immense value for its stakeholders and propelling Nigeria towards a prosperous and sustainable future.
Prof Lere Baale is the Director of Business School Netherlands International in Nigeria.
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