NNPC Limited’s Bright Business Outlook

By Nasiru Omar

When the Petroleum Industry Bill was signed into law in July 2021, some of its key objectives were make the NNPC Ltd to operate as a commercial entity and do its business profitably, pay taxes like every other company, and make returns to its shareholders. Furthermore, a time frame was given within which the initial shareholders will relinquish part of their shares to the public through an Initial Public Offer (IP0).

NNPC Limited has been described in various quarters as the largest company in Africa, going by the sheer size of its assets. Currently the assets of the company are valued at about 60billion dollars.

Speaking at the Nigerian Oil and Gas (NOG) Conference in Abuja earlier in the year, the Group Chief Executive Officer of NNPC Limited, Mr Meke Kyari, said the company will soon float the Initial Public Offer (IPO) as envisaged by the PIA.

“We will go to the market, and this is going to happen soon. This is the new direction, and I can confirm to you that Mr. President is completely committed,” Kyari said, much to the admiration of the industry leaders and investors gathered at the event. It seems the NNPC Limited IPO is one of the most expected and anticipated in recent times with many industry captains and investors calling on the authorities to expedite action on the planned divestment. This probably stems from the understanding that the business outlook of such an investment was bright.

Recently at the Annual Value Review (AVAR) of the NNPC Upstream Investment Management Services, the investment arm of the company, Africa’s richest man and Chairman of Dangote Group, Alhaji Aliko Dangote, said NNPC Limited had the capacity to be the African version of Saudi Arabian national oil company, Saudi Aramco. Coming from a man who is widely known for his business shrewdness, it should not be taken for granted.

“I truly believe that NNPC should be our African Aramco. You have what it takes to take you up there and I am very happy. There is nothing that is impossible. You can make it possible and do not let anything scare you”, Alhaji Dangote said at the event in Lagos

To make this happen Dangote listed what can be done by NNPC Limited, one of such was investing in infrastructure. “We need to look at our infrastructure and see how we can take ourselves to the next level and it has to be driven by NNPC because they are the largest conglomerate and whatever happens to NNPC Limited and their assets, it actually happens to us either directly or indirectly”, he said. The second thing, he said, was for the company to focus on delivering strong returns, growing the investment portfolio, and managing portfolio risks. Furthermore, the business mogul talked about reducing the cost of production as one of the strategies NNPC Ltd company can adopt to get to the top.

“You need to benchmark costs with producers in similar basins and aim to be the lowest amongst your peers. Some existing government policies, as laudable as they may be, also need to be re-evaluated. For instance, we need to strike a delicate balance between encouraging local participation in the oil and gas sector and compromising efficiency and cost. Let us begin with delivering strong returns which, of course, is a function of price and cost. While price in your industry is determined by the market and so clearly outside your control, the same cannot be said about cost. More aggressive cost targets need to be adopted,” Dangote said.

There is good news already. NNPC Ltd is doing all the things listed by the business mogul. For instance, it has invested massively in gas infrastructure which the GCEO of NNPC Limited, Mr. Mele Kyari, recently said would open up the economy. He said the business of the Company goes beyond providing value as the PIA has also given it authority to ensure energy security in the country. He said energy security was not only about providing fuels at the filling station but also creating the infrastructure to bring the energy to the people. Such understanding, he observed, underpinned the investment by NNPC Ltd in AKK Gas Pipeline project to bring gas to power plants in Abuja, Kaduna and Kano and the commitment to invest over ₦2trillion on roads across the country under the Tax Credit Scheme.

“Energy security is beyond just providing fuel at the fuel stations. It can mean power, it can also mean the infrastructure to deliver energy to the people including roads, which is why we saw that mix and decided to participate in the Tax Credit Scheme. We know this is connected to our work. We know that this will do well in delivering energy to the people. More than anything, it can bring the collateral value to the country, creating economy of opportunities for our people.”, Kyari emphasised.

Mr. Kyari said the AKK Pipeline Project will bring cheap source of power supply to many parts of the country to boost resuscitation of industries along its corridor and ensure utilisation of the nation’s gas resources to the tune of over 8billion standard cubic feet (scf) of gas to be injected into the network.

Reinforcing the trend, he said, observations have shown that businesses were springing up along the stretch where NNPC Ltd has taken gas supply to.

In all these, the GCEO noted that the company has not lost track of energy transition but was applying necessary strategies to ensure adequate responsible exploitation of fossil resources of the country to grow the economy and power development based on the country’s peculiar circumstances.

All the strategies and processes being put in place, including investment in infrastructure, are to pave way for industrialisation of parts of the country and to boost the revenue base of NNPC Ltd to a level commensurate with the value of its assets.

According to Mr Kyari, the projects that the Company has invested in could bring in over 10billion dollars in profits in the shortest possible time with proper management of its assets. For him, the company is already on the growth trajectory.

He said part of the effort made so far in that direction was the reversal of the loss of about N803 billion in 2018, and N1.9 billion in 2019 to a profit of N287 billion and N674 billion in 2020 and 2021 respectively. Expectations, according to the GCEO, are that 2022 performance would be better as it is undergoing final auditing processes before declaration

“Our business, clearly without doubt, accounts for roughly over 48 percent of revenue accruable to this country. Not necessarily NNPC Ltd, but associated businesses, the taxes that comes from our partners, royalties that we all pay and the other incidental taxes from the industry. If you pull them together, by any stretch, over 48 per cent of total revenue for this country is from the oil and gas sector. The oil and gas sector is very critical to the survival of this country, to the progress of this country and for the wellbeing of the people” Kyari said.

NNPC Ltd, no doubt, has a very bright business outlook despite the challenges like crude oil theft, dwindling investment in exploration of fossil fuel due to demands of energy transition and the competition being created by cheap fuel from Russia among others.Collaborations between the company, security agencies and local security providers have led to arrests of people and vessels involved in crude theft. Weekly, the NNPC Limited’s Command and Control Centre tracks real time activities of vandals and illegal movement of vessels and alert security agencies. The war against vandalism of pipelines is paying off, and the barrels are returning slowly but surely.

Are you an investor? Keep your fingers crossed, an opportunity to own a part of the largest conglomerate in Africa is coming!
Nasiru Omar, an Abuja-based public affairs analyst can be reached at: nasom@yahoo.com.