Here Comes The New NNPC Limited
The President, Muhammadu Buhari on Tuesday, July 19 2022, unveiled the new Nigerian National Petroleum Company (NNPC Limited) in Abuja. This follows the official and legal transformation of the Nigerian National Petroleum Corporation into a limited liability company. A new business entity whose operations and activities are now to be regulated under the Companies and Allied Matters Act (CAMA).
This development is per the provisions of the Petroleum Industry Act passed into law by the National Assembly in 2021. The Act in section 53(1) provides that “The Minister shall within six months from the commencement of this Act, cause to be incorporated under the Companies and Allied Matters Act, a limited liability company, which shall be called Nigerian National Petroleum Company Limited (NNPC Limited).”
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Section 53(2) went on to state that “The Minister shall at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of shares to be allotted, which shall form the initial paid-up share capital of NNPC Limited and the Government shall subscribe and pay cash for the shares”.
With an initial capitalisation of 200 billion Naira, NNPC Limited has one of Nigeria’s largest registered share capital. And what does this mean? Capitalisation is the book value or the total of a company’s debt and equity combined. In essence, at the point of incorporation, the new national oil company is valued at 200 billion Naira. However, it is expected that as the company expands its operational and investment portfolios, its share capital will continue to increase.
New Oil Company, Radical Changes
Among other things, here are some of the core changes that have taken place in the new NNPC Limited:
- NNPC Limited is now purely a limited liability (commercial) company. And although its initial share capital of 200 billion Naira was fully subscribed by the Federal Government, there are plans in the nearest future to divest a significant portion of Government interest through an IPO.
- Within 18 months of the incorporation of NNPC Limited, both Ministers of Petroleum and Finance shall determine the assets, interests, and liabilities of (the) NNPC to be transferred to NNPC Limited or its subsidiaries.
- There shall be a board of the NNPC Limited which shall perform its duties in accordance with the PIA, the Companies and Allied Matters Act, and the articles of association of NNPC Limited.
- The board of NNPC Limited shall be appointed by the President and composed of:
- A non-executive chairman
- The Chief Executive of NNPC Limited
- The Chief Financial Officer of NNPC Limited.
- A representative of the Ministry of Petroleum, not below the rank of a director.
- A representative of the Ministry of Finance, not below the rank of a director.
- Six non-executive members with at least 15 years post-qualification cognate experience in petroleum or any other relevant sector of the economy, one from each geopolitical zone.
- As a commercial entity, it will publish its annual reports and audited accounts as well as declare dividends to its shareholders, and taxes to relevant government agencies.
- In terms of its operations, NNPC limited is expected to raise its own funds through various corporate strategies including but not limited to partnerships and joint venture arrangements.
- The new NNPC as a commercial entity will no longer remit funds to the Federation Account as obtainable in the past, but pay taxes like every other commercial business entity.
A Look At The Past To Understand The Present
How did we get here? A concise look at the old NNPC and the long battle to make its operations efficient will provide much-needed insights.
The Nigerian National Petroleum Corporation (NNPC) was established 45 years ago in 1977 to manage Nigeria’s crude oil, gas and petrochemical resources. The oil corporation was to achieve these through engaging in joint ventures between Nigeria and oil multinationals. And also engaging in petroleum production by operating the country’s four oil refineries.
Nigeria is the sixth largest oil producer in the world, with crude oil accounting for more than 80% of our country’s foreign exchange earnings. And as such, the strategic position that a national oil corporation like NNPC occupies in the development equation of Nigeria cannot be overemphasized.
Unfortunately, over time the single most strategic national asset (NNPC), conceived and designed to rapidly drive national development fell into dysfunction itself. In its later years, the NNPC as a government institution became the metaphor for everything wrong with Nigeria – corruption, nepotism, and crass inefficiency.
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Petroleum Industry Act To The Rescue
In the bid to reverse the ill fortunes of NNPC and, by extension, the oil industry in Nigeria, the Petroleum Industry Act was passed by the National Assembly in 2021, following nearly 20 years of “buck passing” since the bill was conceived.
Among other provisions, the Petroleum Industry Act created a new corporate commercial entity known as Nigerian National Petroleum Company Limited (NNPC Limited) to replace the corrupt, inefficient Nigerian National Petroleum Corporation (NNPC). And moving swiftly, the Corporate Affairs Commission (CAC) on September 21, 2021, completed the incorporation of the NNPC Limited in accordance with the PIA.
Following the official unveiling of the new NNPC by Mr President last month, Nigerians and indeed the world have high hopes for the new oil company. We all await with great anticipation as events unfold. And in what appears to be an acknowledgement of these heightened expectations, the Group CEO of NNPC Limited, Mele Kyari, stated that the event has brought “a new day, new hope to upscale relevance as Africa’s largest economy positioned to lead Africa’s transition to new energy by deepening natural gas production”.
Going forward on what lies ahead for the new company, Mele Kyari has this to say, “We are taking a strategic initiative by rolling out a plan to grow retail presence from 547 to over 1000 outlets in six months, hinged on a new commitment to partnership that delivers sustainable value, a new culture to design a quest to be a global company of choice”.
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Funding The New Company
The new NNPC Ltd will now have to source private funding outside Federal Government interventions as a commercial profit-making entity. For example, recently, there have been reports that NNPC Limited has secured a $5 billion corporate finance commitment from the African Export-Import Bank (Afreximbank) to fund major investments in Nigeria’s upstream sector.
This is one of the many fundraising initiatives the new NNPC is currently pursuing. And as a result of these initiatives, the company will be required to declare dividends to its shareholders at the end of each financial year. In addition, it will also withhold 20 per cent of its profit as retained earnings to further grow its business operations like any other commercial entity incorporated under the Companies and Allied Matters Act (CAMA, 2020).
We wish the board and management of NNPC Limited success in their operations.