Open-book NNPC?
The Nigerian National Petroleum Company (NNPC) plans to launch an Initial Public Offering (IPO) backed by President Tinubu. The company…
The Nigerian National Petroleum Company (NNPC) plans to launch an Initial Public Offering (IPO) backed by President Tinubu. The company aims to sell shares to the public after announcing its plan in mid-2023. Meanwhile, Nigeria’s crude oil production increased to 1.473 million barrels per day in June, a 3.14% rise from May and a 4.93% rise from the previous year, the upstream regulatory body’s data shows. The average crude oil production for the month was 1.24 million barrels per day, with blended and unblended condensates at 55,088 and 176,030 barrels per day, respectively.
The NNPC is not ready to launch an IPO. The ₦200 billion ($248 million) capitalisation the Ministry of Finance and Petroleum Resources put together to privatise the firm was for show. The company does not know the value of its total assets and the number of subsidiaries it owns. In June, the House of Representatives asked for a full audit of the NNPC’s assets to ascertain its true inventory, liability and market valuation following the naira’s devaluation. That report revealed startling information. From its findings, it deduced that the company’s total assets are worth ₦28 trillion. However, the assets transferred to the newly minted company were worth ₦26 trillion. NNPC’s 2021 audit said its total assets were valued at ₦16+ trillion. That of the National Petroleum Investment Management Services (NAPIMS) for the same period, though, was ₦21+ trillion. In 1988, the NNPC created Duke Oil to grow to trade Nigeria’s oil and gas and reduce the need for middlemen. Over the years, a couple of more firms emerged. They were registered as portfolio companies that do not allegedly remit anything to the federal government. Duke, until today, receives oil from the NNPC and resells it to other middlemen, defeating the purpose of its establishment. During the investigation, the NNPC transmitted records of 21 subsidiaries, while the House estimates that the firm has more than 25 children entities. The basis on which the firm will be valued for an IPO is suspect if these discrepancies exist. Based on 2022 market incentives, PricewaterhouseCoopers (PwC)’s tax head Taiwo Oyedele said the firm should have been valued at $250 billion. With that valuation, the firm should have raised $50 billion from selling 20% of its stake, paid $9.5 billion in taxes and $7.5 billion in dividends. The NNPC has long been accused of being an opaque and corrupt behemoth. Becoming a public company will be a drastic change for the company, and it is difficult to see how this can happen in one year. First, the Petroleum Industry Act must be fully implemented, and the NNPC must cease being an industry regulator. Second, many corporate governance changes will have to be made on the board. Third, the finances of the company should be intensely scrutinised going forward. A key requirement will be transparency around the company’s financial statements, something most industry watchers are looking forward to. Should such an IPO be successful, then it will be very positive for Nigeria as the NNPC will, at last, have a chance of fulfilling its potential. Stakeholders have been expecting this move for a long time, so it is welcome.