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How FG failed in its promise to unbundle NNPC, institute periodic balance sheet display

The sustained deficit financial results so far recorded by the Nigerian National Petroleum Corporation (NNPC) in the last three year may continue unabated if strategic reforms or signing into law the recently passed Petroleum Industry Governance Bill (PIGB) in law.

Business Hilights Intelligence Unit (BHIU) recalls that during the highly publicised 2015 election eve debate organised by the Nigeria Political Parties Discussion Series (NPPDS), Lai Mohammed, the then National Publicity Secretary of the All Progressives Congress (APC), now Minister of Information and Culture, had assured that the APC government would not only unbundle the NNPC, it would ensure it publishes its balance sheets periodically for public scrutiny.

He argued that “The NNPC is too powerful and self-regulatory. There is no way the NNPC can regulate itself. It should concentrate on operations”.

However, more than three year down the lane, nothing in the resemblance of the promises of the party on NNPC has taken place even as the Presidency last week claimed that it is yet to receive PIGB passed into law by the National Assembly barely one month now.

The trend does not only represent the loss of potential revenue for government but also

Industry analysts say with the state of affairs at the NNPC, a major challenge for the 2018 budget expectations and implementation will be the unprecedented surge in losses caused by lack of corporate governance and inability to change old ways of doing business.

The history of revenue losses in NNPC since the beginning of this administration shows serious loss of scare resources.

For example, in 2015, the corporation lost N267.14billion. The following year, it was set back by N197 billion. And in 2017, data from its financial statements showed N82 billion in operational losses.

However, while the corporation earned N2.046 trillion in revenue in 2015, it spent N2.313 trillion, leaving a loss of N267.138 billion. Its corporate headquarters recorded the highest loss of N162.736 billion, while its product supply and distribution arm, the Pipelines and Products Marketing Company (PPMC) came second with N162.06 billion loss, followed by a combined loss of N82.09 billion from its three refineries.

NNPC’s financial and operational report in 2016 showed that the corporation earned N1.726 trillion, but recorded an expenditure of N1.923 trillion. Losses from its refineries alone totalled N78.95 billion. In a review by Bloomberg, the latest account, showed that losses from refineries and corporate headquarters alone stood at $500 million.

Key problem of the negative financial returns according to experts, can be traced to a number of factors including cold war between the Minister of State, Petroleum, Dr. Ibe Kachukwu and the GMD, Dr. Maikanti Baru, the Corporation’s assumed self-regulatory and above-the-law modes that are randomly displayed.

It would be recalled that key issues raised in the leaked memo from Dr. Kachukwu to Mr. President had not been resolved rather it was apparently swept under the carpet till date.

One of the key issues was the revelation of signing of about $25billion contracts without recourse to Minister of State even though the NNPC was swift note that by the law establishing it, it has no reason to seek any approval from a minister of State but the Minister of Petroleum which in the last three year, had remained the President himself.

Currently, observers say with the rising crude oil price, payment of fuel subsidy or what the Corporation tagged under-recovery will jump to unprecedented high, thus heaping pressure on the nation’s joy of reaping from oil price surge.

Otherwise, with the rising crude oil prices and the absence of functioning refineries, things could worsen in 2018 as the cost of products, especially petrol that is largely imported, has been pegged at N145 per litre.

The larger part of the losses made by the company in the past three years came from the corporate headquarters, refineries, and mounting under-recovery from the import of petroleum products.

In an interview, President and Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, expressed fears that more losses will be recorded by NNPC this year even though it is expected to make more money for the country.