The primary aims and economic objectives of establishing any legitimate business venture are basically to provide the needed goods for customers, render services to clients, and ultimately make expected profit (as the marginal financial benefit at the end of every economic exercise). Business operations, in certain instances, could turn out to be unfavourable in the end (for some obvious economic reasons or due to prevailing market forces), hence some financial losses made. Such records do not necessarily communicate business failure, nor mean non-success achieved for the services rendered to the clients or goods supplied to the customers/consumers. They could represent ‘latent gain’, by way of establishing business relationships for sustainable future operations. This may not momentarily be quantified in physical financial terms at the point in time and may, more or less, imply “goodwill”. However, this latent gain or goodwill is expected to manifest into flourishing fiduciary benefits for the business entity in due course. Head or tail, the essence of running any profit-oriented venture is to ultimately sustain growth in future economic engagements and commercial activities and as a going concern.
Focusing on the Nigeria’s oil industry, the Petroleum Industry Act (PIA) as a game-changer for the industry provides a standard and uniform regulatory framework for the oil and gas sectors in Nigeria; and it clearly stipulates terms of reference, legal frameworks and corporate governance structure that were put in place in establishing the Nigeria National Petroleum Company Limited (NNPCL) as a fully commissioned profit-oriented company in July 2022. That firmly stands NNPCL on a footing to fully operate as a business enterprise that is expected to freely operate, make and declare profit (and not loss) in her undertakings. The latest data from NNPCL (according to a news report), shows that it generated N553.99 billion in revenue from oil and gas operations, while 94.77 percent of its revenue was spent on petroleum subsidy payment in August. This information, to any normal and serious minded business individual or entity is a very serious failure in the running of a going concern because such performance is not sustainable.
It is incredible to hear that 94 percent of revenue realised by a business or private company (precisely the NNPCL) was spent on petroleum subsidy in the month of August, 2022. The NNPCL, operating on a commercial basis, is expected to be frugal in spending. In as much as the management of the company is solely in charge of taking decisions on the income and expenditure of all financial transactions, its credit control unit ought not to permit humongous financial bleeding of this nature, which appears to suggest an aimless financial consumption pattern (wasteful spending without a productive backing for commensurate replenishment in sight). This definitely is not sustainable for any business growth. Petroleum subsidy is a policy that is heavily powered under government’s fiscal recklessness with near-zero transparency and foggy and beclouded accountability. Yet, NNPCL (which claims to have been established under the PIA 2021 operational framework) is expected to be a fully operational profit-oriented business entity. Through the subsidy regime, the hard earned money for the nation is prodigally wasted and lavished (“94 percent of generated revenue” just wished away like that) without recourse to proper management of money and improving the ailing economy.
If Nigeria’s economy must survive the present economic turmoil, inflation, and increasing poverty among the citizens of Nigeria, then this notoriously counterproductive scheme must be done away with. With this style of running and managing NNPCL, it would be near impossible for the newly set up business enterprise not to continue like its predecessor, the Nigeria National Petroleum Corporation (the old NNPC). Share insensitivity has befallen our leaders managing the affairs of the nation’s oil industry. If that is not reversed, the tumbling exchange rate of our local currency (the naira which currently exchanges at N730/USD) will keep getting weaker and weaker by the day at the forex market.
The way things are going, this same issue, which is the major cause of economic stagnation by its poor performance indicators, can collapse the economy, unless something very drastic is done in the manner this commercial enterprise runs her business. It calls for a radical change in its financial management; otherwise, there is no visible hope for the nation’s economic survival in the near future.
The only and major source of the nation’s foreign exchange earnings (up to 83%) and a significant contributor (up to 70%) to the nation’s total revenue generated, still remains the nation’s oil industry. This fact cannot be denied the oil industry; and moving forward demands that NNPCL should stop the rogue Petroleum Subsidy wastage on foreign refined products’ imports, by locally providing the minimum daily demands of refined products. Only NNPCL knows how best to solve it and achieve that feat because they are in charge of the major raw material (crude oil), and they also regulate the local refiners.
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