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Mr. Mele Kyari, Group Managing Director of Nigeria National Petroleum Cooperation (NNPC) |
Notwithstanding the depth of professional touch that is
reflected in the account presented, experts who spoke to source maintain that
the document, going by its antecedent, could not be treated as one that
contains the ingredients of transparency.
The Group Managing Director of NNPC, Mallam Mele Kyari, on
August 26, 2021, presented the corporation’s 2020 Accounts at a press
conference held in Abuja, after President Muhammadu Buhari, who also doubles as
the Minister of Petroleum, had applauded the corporation’s feat after 44 years.
Kyari attributed the turn-around of the corporation from a
loss of ₦803bn in 2018 to profit of ₦287bn in 2020 to the aggressive
implementation of cost-cutting measures, improved efficiency through business
automation, emphasis on commercially-focused investments and non-interference
in the management of the Corporation from any quarters.
The GMD also added that the NNPC saved a lot of cost through
contract renegotiation by up to 30 percent on the heels of the COVID-19
pandemic, introduction of technology that drastically cut travel cost through
reduction in in-person meetings and the general automation of processes that
enhanced efficiency across the group’s businesses. He said the management’s focus
on the prioritisation of investment and staff welfare also helped in boosting
the corporation’s overall productivity and bottom line.
But the views of most industry experts and stakeholders, who
spoke to NaijaOnPoint Media, was that the NNPC’s published accounts should be
taken with a pinch of salt as it may not have been a work of transparency and
sincerity of purpose. They argue that
for a legacy loss-carrying establishment to jump out of a deep hole of losses
into the orbit of humongous profit means that not everything must have been
considered.
The first salvo was fired by Nigeria’s foremost investment
banker and founder cum pioneer CEO of Stanbic IBTC Bank Plc, who is also
President and Founder of Anap Business Jets Limited, Atedo Peterside said that
NNPC should come clean.
“There is an allegation that the management of the NNPC
dipped their fingers in the federation’s cookie jar in order to announce a
bumper 2020 profit; they should come clean and publish the details of all
dividends received by them and tell us which ones they recently diverted from
the federation to themselves,” Peterside said.
In an exclusive interview with NaijaOnPoint Media, the
Managing Director/CEO, Taurus Capital & Advisory Servicee and Taurus Oil
& Gas Limited, Dr Nnaemeka Obiaraeri, explained that the NNPC financials
that showed a profit of N287 billion in 2020 should be interrogated adequately.
According to him, the business of NNPC falls into three which did not show any
window of activity that would result in a profit since 2015, not to talk of hitting
N287 billion in a COVID-19 year.
“The NNPC as a corporation did not make any profit. If a
business enterprise says it made profit, the first thing is to find out what
business it does. What goods and
services does the business produce or offer?
“The NNPC buys PMS
(petroleum motor spirit) at an average of N250 and N270 per litre, depending on
what the market price is. They will sell
it at a reduced or subsidised price of N148 per litre to the marketers. They bring in an average of 20 billion litres
per annum. This year, it is going to be more than that since they say they
import 110 million litres per day.
On this, they will be making between N2 and N3 trillion loss
because they are buying at a higher price and selling at a discounted
price. Now, they will dip their hands
into the Federation Account to make up the price. That is what they called
subsidy which, on its own, is an offence because it was not appropriated by the
National Assembly. The law says you
cannot spend such funds that have not been appropriated by the National
Assembly. That is one side.
“The other business they do is managing the refineries. The
refineries are not producing. NNPC, on their own, create losses on those
refineries. Between 2015 and 2020, total
losses incurred by those refineries are over N800 billion. So, from where did
the NNPC make the profit?” Obiaraeri said.
The investment and energy expert noted that the NNPC
collects the profits made by its subsidiaries and the dividends from the
Nigeria National Liquefied Gas Limited on behalf of the Nigerian government.
“Their profits are meant for the Federation Account. The
money (in the Federation Account) belongs to the federal, state and local
governments. For instance, we have the
Nigerian Petroleum Development Company (NPDC) which is a subsidiary of NNPC. It
is an independent entity with its own balance sheet. Their responsibility is to
manage the oil blocks and other assets on behalf of the Nigerian government,”
Obiaraeri further explained that dividends received from
these joint ventures had been paid into the Federation Account but the
arrangement changed in 2019 when NNPC began to retain a portion of the receipts
which it did not pay into the Federation Account.
He noted that “over four decades, dividends received from
these joint ventures have been paid into the Federation Account”, adding. “What
I suspect may have happened was that in 2019, against the usual practice, most
of those companies paid dividends and NNPC decided to retain a portion of those
dividends.”
“Again, NNPC has been making losses. From 2015/16 to 2020, they made accumulated
losses of over N800 billion. Now, all of a sudden, in 2020 when the world was
on lockdown, it made such a humongous profit.
Did NNPC operate in a different world? Look at the balance sheets of
other nations’ oil and gas corporations:
Saudi Arabia’s Aramco declared over $110 billion profit in 2018. In 2019
they declared $83 billion profit. In
2020, when COVID-19 was ravaging the world, they declared $42 billion profit
which is about half of the 2019 figure,” Obiaraeri said (see full interview).
Dr Olu Fasan, Visiting Fellow at the London School of
Economics, argues that the government has no business running a refinery as that should create an avenue to prevent
the losses being recorded by the national oil corporation.
“My view is that the government has no business running a
refinery. The seven refineries in the U.K. are owned by private companies,
while the government provides a regulatory environment. The NNPC should be
fully privatised, and it is a mistake to “privatise” with 100% federal
government ownership as required under the PIA.
“The NNPC can’t be properly run and make profit as a
state-owned enterprise. SOEs are not known to be well-run and profitable
anywhere in the world. Nigeria won’t attract quality investment into the oil
and gas sector unless the government’s role is reduced to that of a light-touch
regulator.
“In any case, if the NNPC is not making profit, where will
the 30% for exploration in frontier basins come from, as under the act it
should come from NNPC’s profits,” Dr Fasun said.
Dr Ik Muo, Economist and Finance Teacher, Olabisi Onabanjo
University, Ago-Owoye, Ogun State, said NNPC must have made profits since they
receive and retain monies from the subsidiaries and profits from other
government investments.
“I was among those elated and surprised when NNPC declared
such a humungous profit . I was surprised because most of the refineries are
either idle and are maintained with intimidating sums or are operating at
laughable capacities while the full operational costs are borne. However,
technically speaking, the NNPC did make
some profits because they could have finished all these monies on 1001
expenditure subheads.
“If they retained the monies and had a right to spend then
but decided to save and report some of them as profits, then, it can be taken
as profits. It may also be possible, that as in the case of JAMB, surpluses in
previous years were underreported and flittered away by the previous by the
Executive management. So, on the surface, we should commend the GMD and watch
out for the sustainability of this profitability,” he said.
The breakdown in the NNPC 2020 report showed that the
group’s current liabilities stands at N10.8
trillion as against the current assets of N6.2 trillion. Finance experts say
that this raises ‘material uncertainty’ about the group’s operations as it
carries liabilities of N4.6 trillion in excess of its assets. The report also
explained how NNPC had been sustaining recurring losses over the years,
culminating into N1.5 trillion as of December 2020.
Obiarari noted that NNPC could not have made profit with its
depth of loss-making. “NNPC must cut costs to make profit. They are not cutting costs. There are obvious
ones in their books – those refineries. You cannot be carrying a loss-making
venture and still want to make profit.
Let them privatise the refineries. By privatising those refineries NNPC
will be eliminating over N150 billion loss from their operations. You can’t be
carrying a loss and say you are making profit,” he said.
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