Wumi Iledare
NNPC Limited is the dawn of the new Nigeria oil and gas industry for Nigeria. Congratulations to the NNPC Limited Board and its inaugural management team. It is gratifying to see PIA provisions at work in earnest.
It is interesting to note that this is not the first time; the Federal Government would attempt to reform, rebrand, rekindle and restructure Nigeria Oil and Gas! The process started with the Petroleum Inspectorate in the 1960s, and then Nigeria National Oil Company (NNOC) was created in the early 1970s. The institution, Nigeria National Petroleum Corporation (NNPC), came into being in 1977 with the NNPC Act, and with the Petroleum Industry Act (PIA) 2021; NNPC Limited has now emerged in 2022.
That the immediate past NNPC played too much of an agency role than NNOC is an understatement, hence, the intent of PIA 2022 by the framers to clearly define a commercial framework for a new NNPC. The reform process actually started in earnest in 2000 with the Oil and Gas Sector Reform Implementation Committee (OGIC). But for some resistance by NNPC itself, this event that is being celebrated in 2022 would have happened in 2008. It is, however, better late than never a worthy mantra on this occasion.
The new dawn in the oil and gas space in Nigeria and the NNPC Limited in particular, comes with challenges and opportunities in this PIA 2021 Era.
First, NNPC Limited is a commercial entity now with mission and vision to maximise stakeholders’ economic value, just as Shell, Total and Chevron are doing unlike the old NNPC, which basically tends to maximise public policy in-kind value. Thus the PIA 2021 expects less agency roles for NNPC Limited if not even zero agency roles are demanded.
To a large extent, NNPC has been the “cash cow” for the Nigeria Central Government in particular and the Federation in general over the years, collecting oil and gas rents, spending on behalf of the federation, and offering other in-kind services to the Federal Government with inappropriate payment for such valuable services. The post-PIA NNPC cannot legally do this agency role services without consequences under the PIA 2021.
There are the key performance indicators (KPIs) to justify investor’s continuous investment and in-kind services without payment are not part of KPIs. Yes, the federation currently owns all the shares at the moment but only for a while. PIA demands selling shares to the public with guidelines. Thus, the Federal Executive can no longer get involved in NNPC Limited structure and philosophy. No more interference in manpower development and deployment.
The reform process actually started in earnest in 2000 with the Oil and Gas Sector Reform Implementation Committee (OGIC). But for some resistance by NNPC itself, this event that is being celebrated in 2022 would have happened in 2008.
Governance structure
There are also other challenges ahead, including the public perception of NNPC Limited as “a new wine in an old wine bottle.” It is less likely than not that NNPC Limited can change this perception without a complete overhaul of the current governance structure beginning with its Board of Directors as currently constituted! Further, professional competence not political expediency is required to maximise stakeholders’ value in the selection and promotion of senior and upper management team!
The other challenge is how NNPC LIMITED will consciously come to terms with the fact that the agency role can no longer be in its radar. In that case, NNPC Limited needs a new manpower development and deployment strategy that is completely different from the old practice to achieve stakeholders’ expectations.
Anything that is out of alignment with PIA 2021 provisions is an illegality! NNPC Limited must be aware that the expectations of stakeholders now is obedience to the laws of Nigeria as Shell, Total, Mobil and Energia do to maximise value! Pay royalty and taxes as when due. It must comply with regulatory demands by the Petroleum Commission and the Authority
The opportunities are huge in terms of creating value for stakeholders with the abundance of gas resources and oil resources at its disposal. The human resources are huge as well but governance mentality has to change to harvest these resources effectively, efficiently, equitably with optimal professional ethics. Gone must be the day you keep redundant work force if production cost is to be minimized.
The implementation of PIA 2021 provisions on NNPC Limited cannot be selective and neither will the business as usual approach create the type of value addition to attract investments as envisaged in the PIA.
My prayers are with the management of NNPC Limited and I am hopeful that the PIA provisions would be adhered to for posterity.
God bless the Federation called Nigeria!
- Iledare is a Professor Emeritus in Petroleum Economics and Executive Director, Emmanuel Egbogah Foundation.
