File Photo- Caption: From left, Chairman, Board of the Nigerian Exchange Limited (NGX), Abubakar Balarabe Mahmoud, SAN; Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mele Kolo Kyari; and Chief Executive Officer, NGX, Temi Popoola; during a courtesy visit to the corporation on Tuesday, September 7, 2021, in Abuja (READ MORE).
By Victor Ogiemwonyi
The Nigerian National Petroleum Company (NNPC), now NNPC Limited, is back in the news, announcing that it can no longer supply crude oil to local refineries like Dangote Petroleum Refinery, because all its crude production is committed to forward sales.
Additionally, reports indicate that the last quarter of 2024 saw the highest importation of petroleum products into Nigeria, despite the fact that local production now exceeds demand.
Unsurprisingly, the naira is once again under pressure. These petroleum imports must have been paid for using Nigeria’s scarce dollar Reserves, further exacerbating the devaluation our currency the Naira.
The insistence on selling foreign exchange (FX) to petroleum importers, which accounts for over 40% of FX demand, limits the availability of FX for importing essential machinery and raw materials for the industrial sector. This flawed policy continues to frustrate those who recognize its negative impact on the economy.
NNPC’s Lack of Transparency
The opacity surrounding NNPC’s operations raise concerns about accountability, since the company frequently makes corporate decisions with impunity, reinforcing the suspicion that its full story is not and may never be known to the public.
A fundamental policy shift that could make NNPC more accountable and beneficial to Nigeria would be to publicly list its shares for trading on the Nigerian Exchange Limited.
Doing so would subject the company and its management to market rules and scrutiny.
Currently, the lack of transparency is reminiscent of a conversation I once had with an executive from an International Oil Company (IOC) in Nigeria who explained that no one truly wants NNPC audited, because it serves as a “piggy bank” for the government. If the government needs a new helicopter, for example, it simply instructs NNPC to buy one—no need for legislative approval or appropriation processes.
Therefore, should NNPC become publicly listed such opaque transactions would cease, making its financial dealings visible to all stakeholders, which is precisely why leadership of the state-owned oil company is reluctant to embrace public listing. Instead, it continue to engage in new ventures and sign long-term contracts with little public accountability.
For a corporation supposedly preparing for public listing, one would expect financial and legal advisors to have been appointed by now, but there is little indication that any meaningful work is being done in this regard. If it takes this long to prepare for a listing, it further underscores the deep-rooted issues within NNPC. The best course of action would be to list the company as it is and let investors determine its value.
Lessons from the Petroleum Industry Act (PIA)
The delay in listing NNPC is reminiscent of the Petroleum Industry Act (PIA), which took nearly a decade to pass the necessary legislative rigour, and when it finally became law reluctantly, it was expectedly a compromised version that satisfied no one eventually. Multiple vested interests diluted its original intent, resulting in unnecessary bureaucratic expansion. Instead of maintaining a single regulator, Department of Petroleum Resources (DPR), the Act created two separate agencies:
- NUPRA (Nigeria Upstream Regulatory Agency)
- NMDRA (Nigeria Midstream and Downstream Regulatory Agency)
This fragmentation has only added administrative complexity and increased running cost, rather than improving regulatory efficiency.
NNPC’s Value Is Wasting Away
Oil is a wasting asset, and the slow but sure global transition to renewable energy means NNPC’s value will continue to decline. Compared to a decade ago, NNPC is far less valuable today. Publicly listing its shares would inject the much-needed capital, improve efficiency, and introduce transparency into its operations.
There are at least five NNPC subsidiaries that if listed separately would each be worth billions of Naira in market capitalisation. Take, for instance, the old PPMC (Petroleum Products Marketing Company), now mainly NNPC Retail. Also, if NNPCL’s pipeline division were separated and run as an independent entity, it could focus on:
- Expanding national pipeline infrastructure
- Securing pipeline networks
- Reducing reliance on road transportation for fuel distribution
Currently, the transportation of petroleum products by road poses serious safety risks, leading to frequent accidents and loss of lives and properties. A well-managed pipeline system would resolve this issue while also making fuel distribution more efficient.
Listing these entities separately would also attract investment from the public both individual and corporate, domestic and foreign.
Global Examples & The Aramco Case Study
The benefits of listing NNPC are undeniable. Other national oil companies, many established at the same time as NNPC, have successfully transitioned into publicly traded entities and are doing well and contributing tremendously to national economic growth and development.
A prime example is Saudi Aramco, which completed its historic public listing a few years ago. Despite the initial skepticism, the offering was a massive success, proving that national oil companies can thrive under market discipline while still serving national interests.
The resistance to publicly listing NNPC stems from entrenched interests that benefit from the current opaque nature of its operations. However, delaying this transition only erodes the company’s value proposition.
My argument, therefore, is that if Nigeria truly wants the NNPCL to be efficient, effective, transparent, and accountable, the next logical step is to list it on the stock exchange.
And, the time to act is now.
Ogiemwonyi, a retired Investment Banker, writes from Ikoyi, Lagos.
