THE Nigerian National Petroleum Company Limited has again proven to be a monumental failure and a national embarrassment. After several denials and no more room to manoeuvre given the prolonged petrol scarcity, it has now admitted to owing international oil traders for petrol cargoes.

It is absurd that a company that declared a net profit of N3.29 trillion for the year ended in December 2023 – an increase of over N700 billion or 28 per cent over the 2022 profit of N2.54 trillion – is indebted by $6.8 billion to international oil traders.

This has resulted in crippling petrol shortages nationwide for over two months because fuel cargoes are stranded at the seaports. Petrol now sells mostly between N800/l and N1000/l and is unavailable at many petrol stations. This has instigated hardship and high transportation costs.

Financial experts have suggested that the NNPC, despite all its simulation, is illiquid to the extent that it has lost its going concern status. If it were a bank, it would have been liquidated.

This is a pointer to the ineptitude, and maladministration that has defined the NNPC’s operations through the years. The NNPC, as presently constituted, is a danger to Nigeria and its economic future. It should be sold lock, stock, and barrel immediately.

It is disgraceful that the NNPC cannot manage its four refineries. With a combined name-plate of 445,000 barrels per day, they have remained comatose for over 30 years. Different administrations have spent more than $20 billion to overhaul them.

This gross failure has left Nigeria with the dubious paradox of an oil producer that relies on fuel imports. Even the most recent efforts marked by promises to restart the refineries have seen several postponements. The Muhammadu Buhari administration borrowed $1.4 billion to fix the Port Harcourt plant before the end of 2023. The reopening date has been postponed for the sixth time.

In contrast, Dangote’s 650,000bpd refinery took eight years from groundbreaking to completion and first fuel delivery.

The NNPC is supposed to be Nigeria’s most valuable company as the custodian of the country’s vast oil and gas assets and proven reserves estimated at 37 billion barrels and 209 trillion cubic feet of gas. It is the key source of foreign exchange and funds for the national budget.

It is supposed to rival other national oil companies like Petronas of Malaysia, Equinor of Norway, and Petrobras of Brazil. These companies play pivotal roles in the management of energy assets and economic development of their countries; the NNPC remains a source of distress for Nigeria.

The NNPC has been a disaster. It has failed to guarantee energy security, stable fuel supplies, a steady revenue stream for the government, and facilitate the development of the oil and gas sector.

The behemoth’s operations are defined by a lack of accountability. It is a cesspool of opacity hijacked by politicians and non-state actors to serve dubious ends. Its management in recent times has exercised power over the state by withholding remittances due to the Federation Account on the grounds of having to defray petrol subsidy costs as well as routinely failing to pay taxes.

The Revenue Mobilisation Allocation and Fiscal Commission complained in June 2023 that the NNPC withheld about N8.48 trillion it claimed as subsidies for petrol since January 1, 2022.

NEITI, in its 2021 Oil and Gas Industry Report, said the NNPC did not remit $2 billion in taxes to the Federal Government in 2022. The NNPC denied this.

The failure of the NNPC as an entity has proven costly in terms of humongous subsidy payments estimated to top N5.4 trillion by the end of this year. The subsidy regime itself has been a metaphor for corruption.

A probe launched by the Goodluck Jonathan administration in 2012 uncovered a fraud of $6 billion (N9.6 trillion at the current exchange rate) in bogus subsidy payments as NNPC officials colluded with all comers to defraud the government. Even now there is no clarity on how petrol subsidy payments are determined.

In the upstream, the NNPC’s perennial failure to meet cash-call obligations to international oil companies has cemented its reputation as an unreliable partner, which is a major reason why no new major investments have materialised in the oil and gas sector in the past 15 years.

Most of the NNPC’s woes have been due to political interference and control. It has never been run as a business. Its funds have been used as a source of patronage with sweetheart deals and contracts given to enrich a privileged few. It is an open secret that the NNPC funds have been used to bankroll all sorts of expenses including elections by politicians. President Bola Tinubu, who removed petrol subsidy in May 2023, must muster the political will to end this charade.

The Immediate action is to set machinery in motion for the full privatisation of the national oil company. Experience has shown that private sector management will help the NNPC run efficiently and profitably in the short term despite its current financial constraints. With a conservative valuation of N100 trillion, the company has enough leverage to unlock fresh capital to refloat its operations and salvage its reputation. This cannot happen with government appointees, beholden to political interests remaining in charge.

The Nigeria LNG in which NNPC owns 49 per cent has maintained profitable operations with revenues topping $150 million a year despite huge challenges because its management has been drawn from the ranks of Shell, a major partner with 25.6 per cent holdings.

The Eleme Petrochemicals company, which was sold to Indorama Group in 2006 for $226 million was able to pay its owners a dividend of N9.5 billion (approximately $74 million then) after only one year of operation. The new owners took only four months to complete turnaround maintenance that the NNPC failed to do since the plant was commissioned in 1996.

Privatising the NNPC is long overdue. Tinubu should make the move if he does not have a hidden agenda.

However, such privatisation must involve credible international institutions such as Standard & Poor’s, KPMG, and other reputable consulting firms. A listing on the stock exchange should involve majority shares, the government must let go of control. The Margaret Thatcher administration in the United Kingdom privatised British Petroleum and British Gas and the companies are running profitably after delivering immediate cash for the government.

Nigeria needs such a huge cash injection to refloat the economy and dig its way out of the current fiscal hole marked by a national debt of N121 trillion and rising, and over a third of the budget committed to debt servicing.

The new Investors must exclude politically exposed persons, indeed anyone connected to past and present governments and they must bring in fresh capital.

The errors of the power sector privatisation must not be repeated where briefcase investors backed by past and present politicians hijacked the process while Nigeria is saddled with distribution companies that have no funds to invest and instead remain mired in debt.

Tinubu must sell the NNPC now! (The PUNCH Editorial)

Update news