“July 19 should remain a special moment in Nigeria’s economic history,” wrote Prime time columnist Reuben Abati. On that day, nearly a year after the long-awaited Petroleum Industry of Nigeria Bill came into effect, providing the legal framework for the sale of shares, the Nigerian National Petroleum Corporation finally became a private company – the Nigerian National Petroleum Company Ltd.
The former state-owned company, known for its relatively poor leadership and lack of profits for about 45 years, will now be independent of government and operate without public funding, with the new goal of creating value for its shareholders.
NNPC shares and assets, including oil blocks and refineries, are now held by the oil and finance ministries.
“We are transforming our oil industry, to enhance its capability and market relevance for current and future global energy priorities,” President Muhammadu Buhari said at the unveiling of NNPC Ltd at the State House Conference Center in Abuja.
By transforming from a corporation to a limited liability company, NNPC becomes the largest and potentially most profitable company in Africa, according to NNPC CEO Mele Kyar.
“We know for sure that the [potential profits] of this company exceed 287 billion naira [$692m]. And we’ve seen the progress, and we know it’s possible to scale that up.
The Nigerian government is confident that the new entity, which operates production joint ventures with oil majors including Shell, Total, ExxonMobil, Chevron and Eni, will attract more foreign investment and operate as a profitable entity that will declare dividends.
But oil and gas revenues in Nigeria amounted to 1.23 trillion naira between January and April, well below the projected 3.13 trillion naira. In addition, Nigeria missed its OPEC quota for the first four months of this year, with oil production averaging 1.32 million barrels per day instead of 1.8 million. , according to Finance Minister Zainab Ahmed.
To address the poor performance of oil production in Nigeria, the new NNPC Ltd “will act quickly, borrow money quickly and return people’s money quickly and also be able to make decisions quickly,” Kyar said.
The limited company also hopes to launch an initial public offering (IPO) by the middle of next year.
An IPO will diversify ownership to include institutional and retail investors rather than just the federal government.
Kyari said the privatization of NNPC will promote energy security in Nigeria as an expansion plan to increase its fuel retail presence from 547 to over 1,500 outlets over the next six months has been announced. elaborated.
The new company faces many challenges
NNPC Ltd comes at a time when fuel prices in Nigeria have risen 3.4% in six months. Recently, and despite Nigeria being Africa’s largest oil producer, the pump price of premium motor gasoline was raised to 179 naira ($0.42) per litre, causing widespread consternation.
The Nigeria Labor Congress (NLC) Lagos State President condemned the rise in fuel prices and said it was due to the government’s failure to repair existing refineries.
Dilapidated refineries as well as oil theft and vandalism of pipelines continue to hamper Nigeria’s oil and gas revenue performance and force the country to import most of its refined products.
“For the first seven months of 2022 so far, according to our records, 12.3 million metric tons of PMS have been imported,” said Chief of Naval Staff and Vice Admiral Anwar Gambo during a hearing in the House of Representatives.
With Nigeria forced to import most of its refined products, fuel subsidies have become extremely high in recent years. According to a report by SBM Intelligence, the cost of fuel subsidies increased by 890% between 2017 and 2021.
In addition, the Russian-Ukrainian war recently led the federal government to earmark the sum of 6.72 trillion naira for the payment of fuel subsidies in the 2023 budget.
Faced with the hope of repairing Nigeria’s refining capacity and reducing the country’s fuel imports, as well as generating profits for its new shareholders, the new company therefore begins life with many challenges to overcome.