INCORPORATION OF NNPC LIMITED: WAITING FOR GODOT

?Most players in the Nigerian Oil and gas sector have long awaited the passage of the Petroleum Industry ACT. This has finally been accomplished though not without the normal controversies of a disjointed revenue allocation formula with paltry 3 % profit to host communities and ten times of that to explore non producing areas.

One is not yet sure we have got it right. It is not yet uhuru. I still believe the incorporation of NNPC is nothing different from the privatization of power (Electricity), which was done in a ‘wishy washy’ way that has kept the distribution companies tied to the apron of the same government through power generation and transmission and have taken industrialization to the brink instead of catalyzing the growth as was intended prior to the privatization. The players that invested in this venture have at several occasions threatened to pull out after so many years of unproductivity.

The Buhari led, APC government in Nigeria recently signed the PIA, Petroleum Industry Act after about 20 years in process and also went ahead to incorporate the NNPC which is now named NNPC limited. Notably, the incorporation of the NNPC was one of the components of the PIA.

The president described the incorporation as “a significant milestone in our quest to create an enduring National Energy Company that can compete with its global peers and deliver value to its shareholders, the Nigerian people”.

The NNPC prior to this time had so many subsidiaries, including: DPR, NAPINS, NGC, NPDC, NETCO, IDSL, PPMC, KRPC, PHRC,WRPC, NLNG etc.

The APC led federal government also went ahead to scrap some of the subsidiaries of the old NNPC like the DPR, the PPPRA and PEF replacing them with the Nigerian Upstream Regulatory?Commission (NURC) but nothing was mentioned about the other subsidiaries.

Minister of state for Petroleum, Timipre Sylva has this to say on this development.

“I am really expecting a lot of growth and development in the oil industry. The oil industry has been stagnated for a long time because the process of passing the PIA was on for over 20 years. “So a lot of companies, a lot of investors took a sit-down-and-watch approach. The PIA has clarified the legal framework around the sector and the agencies are in place. I don’t see anything now stopping investors from coming.'

While I agree with Sylva that the PIA has clarified the legal framework around the sector, I am not sure of how the divesting of the NNPC will play out if other subsidiaries are not scrapped, if the cash call backs and other huge debts to producers and other industry operators have been sorted. I am not sure what the status of NLNG, PHRC, WRPC, KRPC etc has become. Are they now private refineries or still belong to the government of Nigeria?

What are the statuses of the OMLs and OPLs? Are they still going to belong to some retired generals and politicians? What happens to all assets and liabilities of the NNPC value chain?

These and many other questions beg answers and are clear indication that it is not yet uhuru. I am sure investors will still be very weary of investing in NNPC without clear and concise privatization framework that stipulates where government interference starts and where it stops, where government regulation starts and where it stops, which liabilities government must clear before public offer and what the new investors will inherit in terms of liability.

One thing I am sure of though, is that a bold step has been taken. How it plays out and how fast it will progress will rely more on the transparency from the Nigerian government as well as the will power to totally relinquish all government appendages to the old NNPC and let the new NNPC start on a strong footing.

I believe this can only take traction towards the tail end of this administration.

Part of my conviction is supported by London magazine, The Economist, assertion on this Buhari led government and they aptly captured as follows.

“Economic troubles are compounded by a government that is inept and heavy-handed. Mr Buhari, who was elected in 2015, turned an oil shock into a recession by propping up the naira and barring many imports in the hope this would spur domestic production.

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We will still watch as events unfold. One clear thing is that the companies that have been primed for international best practices have greater chances of taking undue advantage of the new frame work and also those players that have been primed to do it the Nigerian way, may have minimal opportunity to succeed. It all depends as we always say since 2025. ‘the body language of the presidency.

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