Nigeria’s state oil company records N250bn trading profit in 2016

Isiaka Abdulrazak, the group executive director, finance and accounts of the Nigerian National Petroleum Corporation, said the corporation made a trading profit of N250bn in 2016.

Abdulrazak said this in a quarterly publication of the NNPC, a copy of which was obtained by the News Agency of Nigeria on Tuesday in Abuja.

According to him, his office inherited 65 unaudited financial statements between 2011 and 2014.

He said that though there were challenges that led to the backlog, a Project Steering Committee chaired by him was constituted to meet with auditors and all relevant stakeholders to identify and isolate key challenges and give them priority attention.

Giving an insight into how he was able to clear the corporation’s unaudited accounts from 2011 to 2016, Abdulrazak said this figure was up from a deficit of N123 billion in 2015.

“In August 2015, when the present management of the Finance and Accounts Directorate took over the mantle of leadership, we inherited a total of 65 unaudited financial statements for NNPC corporate and its subsidiaries covering 2011 to 2014.

“The major elements consist of a review of the Group Audited Financial Statements, particularly for 2016 reveals a positive shift to a trading profit of N250 billion from a trading deficit of N123 billion in 2015, indicating a 300 percent improvement in trading performance.

“This is despite the decline in the average price of crude oil to as low as 345 dollars per barrel in 2016, compared to 51 dollars in 2015, and 110 dollars in 2014,’’ he said.

In addition, Abdulrazak said it was also critical to point out that the 2016 result was a reflection of management’s philosophy to enhance profitability by forcing down costs and improving revenue generation.

“For example, we have discontinued sub-commercial business arrangements such as offshore processing arrangements, disadvantaged crude for product exchange swap and poorly-managed strategic alliances.

“To improve revenues, there have been a number of new initiatives such as the introduction of Direct Sale Direct Purchase, a 20-25 per cent cut on all commercial contracts among others.

“Also, revenue analysis shows a 10 per cent increase from N2 trillion to N2.3 trillion between 2015 and 2016.

“Further analysis shows a 75 per cent increase in petroleum product sales from N820 billion to N1.4 trillion, attributable to the partial deregulation of petrol price,’’ he said.

According to him, the statement of financial position has been riddled with persistent losses over time and this had eroded shareholders’ equity.

“You will recall that I mentioned that the Group trading performance improved to N250 billion trading surplus in 2016 compared to a trading deficit of N123 billion in 2015.

“However, the Group ended with a net loss position mainly due to NPDC revenues shut-in as a result of the security situation in the Niger Delta in 2016, and exchange rate losses among others.

“The Group results would have been positive without these factors,’’ he said.

He said the directorate under his watch had recorded successes in areas like managing foreign exchange intervention pool for the importation of petroleum products and savings on insurance premiums.

“This has so far led to more than 340 million dollars year-on-year savings in premiums payable over the period of 2015 to 2018 (about 45 percent) effective reduction in year-on-year premiums.

“Other successes include reducing the unwieldy number of accounts managed by the corporation from more than 2,000 to a little fewer than 200. All the old accounts under commercial banks have been fully reconciled and closed.

“Another is the settlement of the cash call arrears and self-funding mechanism for joint venture operations, successfully negotiating an agreement 6.8 billion dollars to 5.1 billion dollars, a 25 percent drop and the implementation of the self-funding mechanism for upstream joint venture operations for the federation.

“This has resulted in higher government take in royalties and taxes, sustained reserves development and production, restoring investors’ confidence, thereby creating windows for financing opportunities.’’

He said the outlook for the next strategic business period would be to focus on partnering with the corporate services directorate to optimise the utilisation of enterprise resource planning, infrastructure, and architecture to provide an end to integration of NNPC business processes.

“Secondly, we are also focusing on delivering on the blueprint of making the corporation initial public offer ready.

“This will involve principally cleansing our legacy financial data and balance sheet restructuring as well as profitability.

“Thirdly, we shall continue to build on successes achieved with the open publication of monthly operations and financial reporting and rendition of audited financial statements in line with the provision of the NNPC Act and other relevant laws of the land.’’

He said in recognition of the achievement, the NNPC board had further mandated management to clear the remaining outstanding reports for the period 2013 to 2016.