A report that the Nigerian National Petroleum Company Limited spent N1.3 trillion on fuel subsidy and its four moribund refineries in five months challenges the recently rebranded state-owned company’s managers to engineer a radical attitudinal change. For the makeover to impact positively on the country’s economy, there must be a fundamental departure from its opaque, profligate and inefficient ways of doing business to be replaced by a new profit-oriented corporate culture.

Observers fret that the President, Major General Muhammadu Buhari (retd.), and the NNPC executives might mistake image rebranding efforts for structural reforms, and a mere change in the nameplate for transformation. The national oil company however needs a root-and-branch reform that will restructure it from a national liability to a huge national asset.

According to McKinsey, a global consultancy “real transformation” in a corporate organisation “happens only when a leadership team embraces the idea of holistic change in how the business operates—tackling all the factors that create value for an organisation, including top line, bottom line, capital expenditures and working capital.” NNPC bosses should take note.

Worryingly, the “rebranded” firm has been deepening its disastrous engagement in the downstream oil and gas sector. Buhari, who is the de facto Petroleum Resources Minister, should ensure that the NNPC rebranding is not a mere cosmetic exercise.

To his credit, on his watch, the Petroleum Industry Bill that stalled in the parliament for over a decade was finally signed into law, though in a distorted form from the original. The Petroleum Industry Act provides for the full commercialisation of the NNPC. But the replacement of “corporation” with “company,” renaming and merger of some subsidiaries, changes in the titles of executives and divisions, as well as millions spent on a new logo, media advertising and slogans cannot on their own translate into the needed radical overhaul.

The company can plausibly plead that its renewal will be manifest with time as its formal change is just a few months old. That is reasonable. However, critics say that the new NNPC’s stated commitment to running its four failed, loss-making refineries, its continued reeling out of contentious figures of the quantum of petrol it imports, and opaqueness in its accounts and the subsidy that it calls “under-recoveries,” are concerning.

No truly profit-oriented company will persist in holding on to companies persistently losing money; but NNPC’s Group CEO, Mele Kyari, is determined to continue the failed and costly strategy of spending money on the moribund refineries after decades of losses. A report presented to the National Assembly by the NNPC indicated that N1.27 trillion was spent on petrol subsidy, while “refinery rehabilitation” cost N27.33 billion by April this year. The refineries have gulped far too much of public funds, shutting out competition and private sector investment in the oil downstream.

To end the waste, they should be disposed of immediately. It is NNPC’s ruinous refinery operations that reduced the country, a major crude producer, to a major importer of refined products, thereby saddling Nigeria with crippling importation and subsidy costs.

Another report said subsidies are on track to rise to N6.7 trillion by year end. In the year to February 2021, the refineries refined zero crude and recorded N104.3 billion in losses. The National Bureau of Statistics said N1.09 trillion was spent importing petrol in the first six months of 2020. In 2019, it said N1.71 trillion was spent, down from N2.95 trillion in 2018. In the 13 months to February 2020, petrol imports cost N2.5 trillion.

These are significant financial losses which vitiate the PIA Act stipulating that NNPC Limited and its subsidiaries “shall conduct their affairs on a commercial basis in a profitable and efficient manner.” Though Kyari said it grew its profit after tax from N287 billion in 2020 to N674 billion in 2021, it has not paid a single kobo as dividends. From 2019, nearly 80 per cent of NNPC’s subsidiaries have not been remitting dividends to the federation account. A total N1.04 trillion expected as dividends from its subsidiaries went unpaid in 2019.

Governor Nasir el-Rufai of Kaduna State put it bluntly: “Nothing has changed (in NNPC); it’s just a change in name with ‘limited’ at the end. Nothing has changed; they are still taking our money, declaring profit that we don’t see the dividends.”

Reforming an organisation requires cutting ties with its past and doing things differently to achieve sustainable results. With such reforms, Saudi Aramco, Saudi Arabia’s NOC that controls the world’s second-largest crude reserves, has grown its revenue prodigiously to $1.3 trillion, according to Investopedia.

In the same league is the New York Exchange-listed China National Petroleum Corporation with $367 billion revenue and $13 billion net income.

In 2020, workers at the NNPC’s four refineries were paid a total of N69.07 billion even as the plants generated zero revenue and did not refine a single barrel of crude.

The buck stops on Buhari’s table; the refineries should be sold without further delay. The new-look NNPC has been buying up major retail chains. This is poor judgment; as a wholly owned state enterprise, it entrenches the government both as a regulator and a player in the market. This stifles competition and innovation. It is better for NNPC to restrict itself to holding minority stakes in the mid-stream and downstream assets to make way for private investment, management and competition.

A World Bank study of Malaysia’s successful transformation of its government-linked companies recommended a four-point approach to restructuring SOEs: establishing an accountable body; adopting key performance indicators; aligning the transformation programme with national economic development agenda; and investing in human talent.

Buhari should add to these a complete withdrawal of the NNPC from directly managing companies. It should concentrate on operating as a lean, efficient holding company with stakes in a diverse portfolio of assets across the oil and gas sector and beyond.

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