Privatisation: Is NNPC on a self-privatising mission? (1) 

BY ABUBAKAR A. NUHU-KOKO

Abubakar A. Nuhu-Koko, a researcher in petroleum policy and economics, is founder and pioneer executive director, The Shehu Shagari World Institute for Leadership and Good Governance, Sokoto, Nigeria. He can be reached on +234 706 330 6887 or aanuhukoko4000@gmail.com

A quick background history of the Nigerian National Petroleum Corporation (NNPC), now with a slightly modified name tag as the Nigerian National Petroleum Corporation Limited (NNPCL), shows that the NNPC was formed in April 1977 when the then Nigerian National Oil Company (NNOC), established in 1971, was transformed by merging it with the defunct Federal Ministry of Petroleum and Energy and the regulatory arm of the industry, the Department of Petroleum Resources (DPR), to form the NNPC.

The DPR itself was established in 1970 in response to the need for an independent specialised regulatory arm for the oil and gas sector by upgrading the Hydrocarbons Section of the defunct Ministry of Mines and Power, which was formed in 1963 to look after the affairs of the petroleum sector hitherto performed by the then Ministry of Lagos Affairs, from 1959 to 1963.

It can be seen that the Nigerian government did not have participatory engagement or role in the oil and gas industry for about 15 years (1956 – 1971) after crude oil was discovered in commercial quantity in 1956 by Shell International Oil Company at Oloibiri, in present day Bayelsa State. During this period, the industry remained largely and entirely in the control and management of the international oil companies (IOCs) – Shell Petroleum in particular.

Upstream petroleum participation by the federation

Nigeria’s participation in the industry came about with the enactment of the Petroleum Act (1969) and at the behest of the Organisation of Petroleum Exporting Countries (OPEC) that requires member nations to acquire great equity participation interest and or nationalize the oil industry from the hands of the IOCs. Nigeria joined OPEC in 1971 and established the Nigerian National Oil Company (NNOC), the precursor of the NNPC.

The Nigerian government began to acquire a minimum of 60 percent participatory equity interest in the operational assets of the IOCs using the NNOC up to 1977 when NNPC was created to manage the Federation’s majority stake in the oil industry in all ramifications (exploration and exploitation, production, facilities construction and marketing of the Federation’s owned equity crude oil, condensate and gas.

NNOC and later, the NNPC, from 1977 onwards entered into joint venture agreements (JVAs) with major international oil companies (IOCs), mainly Shell, British Petroleum (BP), Chevron, Mobil, Agip, Elf and Total, or their predecessor companies. The Nigerian federation acquired up to 60 percent stake in upstream joint venture (JV) operations. The JVAs constitute close to 80 percent of Nigeria’s participation in the industry’s upstream operations. These companies together produced more than 90 percent of Nigerian crude oil production over the years.

Other exploration and production (E&P) arrangements such as production sharing and service contracts (PSCs & SCs) were increasingly introduced in Nigeria’s equity participation in the upstream operations. The PSCs and & SCs together produced about 20 percent of the total daily crude oil production.

Hence, NNPC is a fully vertically integrated (upstream, midstream and downstream) oil and gas company, wholly owned by the Nigerian federation at its formation in 1977. It was transformed into a holding company in 1988 after an unprecedented commercialization and internal restructuring of the corporation during the General Ibrahim Badamasi Babangida’s (IBB) military presidency (1985-93).

As a holding corporation NNPC has over a dozen subsidiary limited liability companies; an investment entity known as National Petroleum Investment Management Services Division (NAPIMS) that manages the Federation’s investment interest in the industry, and a number of partially-owned subsidiaries; Corporate Business Units (CBUs) and a growing number of Corporate Strategic Units (CSUs) and Divisions.

Among the prominent wholly-owned subsidiaries include, but not limited to the following: Nigerian Petroleum Development Company Ltd (NPDC) – which is the only upstream arm of the NNPC; pioneer Eleme Petrochemical Ltd, near Port Harcourt – commissioned in 1965 (60,000 barrels per stream day or bpsd);  new Port Harcourt Refinery plant was added in 1989 with an installed capacity of 150,000 bpsd. This brings the total crude processing capacity of the Port Harcourt Refinery to 210,000 bpsd; Warri Refining and Petrochemical Company (WRPC) Ltd commissioned in 1978 (100,000 bpsd) and upgraded to 125,000 bpsd in 1987, and the Kaduna Refinery and Petrochemical Company Ltd, commissioned in 1980 (110,000 bpsd). Total combined nameplate capacity for the four refineries is put at 445,000 bpsd.

Other limited liability companies established by the NNPC are the Nigerian Gas Company (NGC) Ltd; Pipelines and Petroleum Products Company (PPMC) Ltd; Integrated Data Services Ltd (IDSL); NNPC Retail Ltd; NETCO Ltd; Duke Oil Ltd and many more.  Over the years, apart from some of these incorporated limited liability companies, the corporate divisions of NNPC have swelled astronomically to more than 17 at the end of 2021 and with additional limited liability subsidiaries similarly established.

The long march to privatisation of the NNPC

The foundation for the privatisation of the NNPC was laid in 1988 by President Ibrahim Badamasi Babangida’s (IBB) military presidency (1985 – 1993) as earlier mentioned above. The operations of the NNPC were commercialised using some of its holding commercial business entities named above. Secondly, the IBB regime opened up the upstream sector to private nascent indigenous oil and gas companies; with participation in the first public bidding for marginal oil fields blocks in October 1990 under the supervision of Professor Jibril Aminu, the erstwhile minister of petroleum resources. The two policy and structural reforms opened the way for Nigerian private investors to play a role in the entire gamut of the industry; hitherto, Nigerian private indigenous oil and gas companies were largely restricted to the midstream segment of the industry.

However, between 1988 to date, several attempts were made to push for the full scale privatisation of the NNPC during the times of IBB military regime, the short-lived Earnest Shonekan-led 1993 civil-military Interim National Government (ING) and General Sani Abacha military regime (1993-1998) and the civilian democratic governments from 1999 to date.

These attempts had their roots in the World Bank and International Monetary Fund (IMF) instigated Structural Adjustment Policy (SAP) of the mid-1980s introduced by the IBB military regime in Nigeria from 1986 – 1998. For instance, the Privatization and Commercialization Act of 1988 and the Bureau of Public Enterprises Act of 1993 (which replaced the Technical Committee of Privatisation and Commercialization (TCPC)) defined privatisation as the relinquishment of part or all of the equity and other interests held by the federal government or any of its agencies in enterprises whether wholly or partly owned by the federal government.

Privatisation of the oil and gas industry: The Petroleum Industry Act (PIA, 2021)

The civilian administration of Olusegun Obasanjo put in place new policy frameworks for privatisation of the federation-owned public enterprises that included the NNPC and its subsidiary companies such as the refineries and petrochemical companies. Some of the publicly-owned enterprises were privatised (outright sale) under the privatisation programme supervised by the National Council on Privatisation (NCP) and the Bureau for Public Enterprises (BPE). However, the upstream oil and gas industry privatisation dragged on for more than 20 years pending the enactment of new legislation to facilitate it. For instance, the Petroleum Industry Act (PIA, 2021) to provide the legal, fiscal and institutional and governance frameworks to undertake total reform and transformation of the industry was only signed into law on August 16, 2021 – more than 20 years after its initiation.

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