VICTOR OGIEMWONYI
Victor Ogiemwonyi, a retired investment banker, is a former Governing Council member of the Nigerian Stock Exchange (NSE), now Nigerian Exchange Group (NGX Group). He sent this contribution from Ikoyi, Lagos. He can be reached via comment@businessamlive.com
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 be paid for using Nigeria’s scarce dollar reserves, further exacerbating currency devaluation. The insistence on selling foreign exchange (FX) to petroleum importers, which accounts for over 40 percent 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 recognise its negative impact on the economy.
NNPC’s lack of transparency
The opacity surrounding NNPC’s operations raises concerns about accountability. The company frequently makes corporate decisions with impunity, reinforcing the suspicion that the full story is not 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. Doing so would subject the company 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. He 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.
If NNPC were publicly listed, such opaque transactions would cease, making its financial dealings visible to all stakeholders. This is precisely why NNPC leadership is reluctant to embrace public listing. Instead, they 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. However, there is little indication that meaningful work is being done toward this goal. 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. When it finally became law, it was a compromised version that satisfies no one. 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 much-needed capital, improve efficiency, and introduce transparency.
There are at least five NNPC subsidiaries that, if listed separately, would each be worth billions of naira. Take, for instance, the old PPMC (Petroleum Products Marketing Company), now mainly NNPC Retail. If its pipeline division were separated and run as an independent entity, it could focus on:
- Expanding 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. 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.
Global examples and 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.
A prime example is Saudi Aramco, which completed its historic public listing a few years ago. Despite 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 its current opaque operations. However, delaying this transition only erodes its value. If Nigeria truly wants NNPC to be efficient, transparent, and accountable, the next logical step is to list it on the stock exchange.
The time to act is now!
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