- We expect NNPC to follow up its auditing transparency with more transparency
On June 14, the Nigerian National Petroleum Corporation (NNPC) finally broke the jinx in one vital area that has rendered it probably the opaquest national oil corporation in the world. It published its 2018 annual report containing an audited account of all its 20 units. Not only that, the development came with the assurance that the 2019 books will be released in the coming months.
While the publication is historic, being the first time in the corporation’s 43-year history, no less so is the promise by the corporation that the exercise – an inextricable element in corporate governance – has finally come to stay. To the extent that Nigerians are availed the opportunity to evaluate the activities of the behemoth, the development certainly comes as a major step in the journey to re-examine both its rationale as a national oil corporation, and its place in the fast-changing global energy environment.
Few will, in this wise, disagree that the national oil corporation has been an unmitigated disaster when compared with its OPEC peers. While it has grown octopus-like and expanded its bureaucracy over the years, this is hardly in the context of its original goals of advancing indigenous mastery in the critical areas of exploration, processing and even marketing. Rather, it has over the years become a behemoth whose business model is not only dubious but highly flawed. Renowned as a haven for all manner of political jobbers and rent seekers desperately looking for avenues to milk the nation dry, it was content to play the cash cow so long as oil flowed.
Is it not perplexing that one of its more critical subsidiaries, the Petroleum Products Marketing Company (PPMC) could not even guarantee basic maintenance of its pipelines, hence the current archaic and clearly dysfunctional fuel distribution infrastructure foisted on the country? As for the refineries, aside being cesspits of corruption, they have transmogrified into veritable sink-holes. While they add nothing of value to the value chain, millions of taxpayer-dollars are being sunk into them in the name of Turn Around Maintenance (TAMs) with little to show. All of these because successive administrations have held tightly to the corporation without regards to the laws governing its activities let alone the elementary demands of transparency as one would expect of a public entity.
Welcomed as the 2018 report is, the job is not even near half done. To begin with, it says nothing that Nigerians are not familiar with. For instance, the report says that the four refineries in Port Harcourt, Warri and Kaduna reported N154 billion loss in the financial year under reference. It also says that the investment unit delivered a profit of N1.01 trillion naira from a gross revenue of N5.04 trillion naira ($13 billion). In other words, some of the subsidiaries not only failed to add value to the group, funds from the more profitable entities were actually deployed to prop up the laggards. Now that the report has established what the public already knows, we expect the corporation to act swiftly by addressing the issue. This newspaper’s position is clear on this: such entities which add no value to the group should be scrapped. The refineries in particular should be off-loaded to private entities with requisite expertise.
Another matter, although not directly touched in the report is the intolerably high cost of producing Nigeria’s crude. The Group Managing Director of the NNPC, Mele Kyari, spoke to the issue when he noted in March that the cost of crude oil production currently in the range of $15 to $17 per barrel is way too high compared with Saudi Arabia’s whose cost of production is between $4 and $5 per barrel. Just as the saying goes that a problem known is half solved, we expect the corporation to map out an actionable plan to get this done in the quickest possible time.
