Dataphyte: Why NNPC May Not Succeed as a Private Business Entity

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The research arm of Dataphyte, a data analytics organization, is concerned about the restructuring of the Nigerian National Petroleum Corporation (NNPC) and its subsidiaries.

In his last NNPC performance reportDataphyte pointed to issues such as high production costs, high credit sales, high debt, low revenues and low gross profits as factors that could impede the company’s success under the new deal.

The Petroleum Industry Act (PIA), which President Muhammadu Buhari signed last year, specified the unbundling of NNPC.

Shortly after the law was signed, NNPC Director General Mele Kyari said that the national oil company would be transformed into a private company that would pay taxes and dividends to its shareholders, and that the new company would be incorporated under the Allied Business Act (CAMA).

But lamenting NNPC’s “financial mismanagement”, Adenike Aloba, program director/editor of Dataphyte, said lingering problems would resurface as the government-run company transitions to a privately held company.

She added that the issues could hamper the success of the organization’s operations as a private business entity in the short and long term.

“The Petroleum Industry Act (PIA), which was passed by the National Assembly and assented to by the President in August 2021, necessitated the transition of NNPC to a limited liability company,” she said. said in a statement.

“Based on the 2019 and 2020 audit statements, this review flags concerns that warranted changing NNPC’s governance structure to a private company initially – issues that, if not resolved, may impede the success of the organization’s operations as a private business entity in the short and long term.

“These issues, left to persist, could undermine the essence of oil sector reforms, given the key role NNPC plays in oil sector business and development.

“This follows calls from executive government officials for an amendment to the PIA, to provide among other things for the grant scheme to be extended until June 2023.

“Dataphyte’s review of the audited accounts of NNPC’s activities over the past 2 years indicates that much may not change with NNPC, even as a limited company, if management does not implement the best practices in its financial management and governance structure.”

The data analysis identified six issues that NNPC needs to address as it transitions to a limited liability company.

They include the issue of declining revenue, cost issues, selling and buying on credit, financial management and the issue of NNPC incapacity as a growing concern.


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