On July 1, 2022, the Nigerian National Petroleum Company Limited legally transformed into a company whose operations and activities are regulated under the Companies and Allied Matters Act, CAMA.
The NNPC’s transformation into a CAMA company follows the implementation of the Petroleum Industry Act.
President Muhammadu Buhari will officially unveil the new NNPC Ltd on July 19, and invited all players in the sector to be part of the epoch-making event.
The Corporate Affairs Commission, CAC, had on September 21, last year completed the incorporation of the NNPC Ltd in accordance with the provisions of the Petroleum Industry Act PIA, 2021, which was signed into law by President Muhammadu Buhari on August 16, 2021, following its passage by the National Assembly in July of the same year.
Section 53(1) of the Petroleum Industry Act 2021, requires the Minister of Petroleum Resources to cause for the incorporation of the NNPC Limited within six months of the enactment of the PIA in consultation with the minister of Finance on the nominal shares of the company.
In line with that, the registration by the CAC, the NNPC Ltd was floated with an initial capital of N200 billion making history as the company with the highest share capital in the country.
Mele Kyari, the group managing director, of the company, in his avowed openness and drive for transparency, had made proactive moves in preparation for the July 1 take-off as a CAMA company.
In that preparatory initiative, Kyari’s led NNPC, had engaged the Nigerian Midstream and Downstream Petroleum Regulatory Authority, the Nigerian Upstream Petroleum Regulatory Commission, the ministry of Petroleum Resources, ministry of Finance, governors, legislators, host communities and other key stakeholders to fully comprehend impact of the Act.
Consequently, NNPC had set up a PIA transition committee with specific directive to drive the transitioning of NNPC into a full CAMA company.
There was also an in-house committee backed by globally acclaimed consultants (McKinsey, KPMG, PWC, Wood McKenzie and Olaniwun Ajayi, LP) to define and implement the transition roadmap.
The road map includes valuation of the assets and liabilities, development of corporate governance frameworks, rebranding of NNPC to NNPC Ltd and change management.
The transition of the Nigerian National Petroleum Company Ltd into an entity that would be regulated in line with the provisions of the companies and Allied Matters Act and this will largely position it as a partner of choice to all oil and gas companies globally.
According to Kyari, one of the things that will be different as the NNPC transitions is that it is expected to become a commercially oriented and profit-driven national petroleum company that would be the envy of all players in the sector.
He explained further that the NNPC would be managed like a private sector enterprise and unlike previously when it was owned by the government, the NNPC is expected to become more efficient in its operations.
This, he noted, will enable the company to effectively maximize returns on investment for the 200 million Nigerians, ensure returns for shareholders and pay taxes to the government.
The PIA is largely expected to fully transform the nation’s petroleum industry into a hub of business operations will also attract huge capital globally into the country’s oil sector, strengthen cost recovery and ensure decent returns on investment.
Additionally, the law is expected to promote good governance in the oil and gas sector in tandem with the international best practices.
Kyari, said: “It will help us to have a very transparent, clearly competitive physical framework, where you get to see opportunities on where you can put your money and also get back your money with some benefits.
“It will also refocus on gas development in our country such that as we know gas is the new oil.
“For over 20 years, we have made attempt to change our petroleum negotiate so that we will be in line with expertise industry, which will lead to smarter opportunities. We have been very stagnant for over 24 years without any physical change.
“What happened in the last few days is simply a transformation of activities and transformation of the environment for doing business, making our country very competitive.”
Since he came on board in 2019 as NNPC helmsman, Kyari, who has focused in ensuring the passage of the legislation, has been a major advocate on the need for the lawmakers to pass the bill which he described as a “game-changer for Nigeria’s oil and gas industry.”
According to him, getting the petroleum legislation passed is the right thing to do because investors will not invest their money if they are not sure of how they are going to get their investment back, and what benefits they can get from their investment, as well as how stable the investment climate is.
He explained:“We are aware that the whole world is becoming a petroleum territory and no country will survive except you have a very competitive physical environment.
“What is logic to us is to bring us abound with the best of physical environment that is available in the world, bringing us to a place where also structure of regulation that is also in line with best practices in the world clearly separating the upstream from the midstream and downstream so that our focus can come back to the part of the industry that will surely be the hub.
“For our investors what this means is that there is clarity of our physical environment, there is also a very robust commercial framework, there is also a competitive physical framework.
“So the combination of these three to new investors and existing investors is that they can now take opportunity of the industry. Friendly business environment will guarantee cost recovery and a decent return on investment for investors.
“The combination of these is that NNPC will be the house of opportunities, expand our partnerships, and it will be a very big opportunity for new investors and the country. I think this is a very exciting moment for us as a country.”
On expected changes in the corporation’s assets after the PIA with regards to the incorporation of NNPC as a company under the CAMA, Kyari, reiterated that all assets and liabilities of the NNPC will be transferred to the new company.
As NNPC draw down the curtain as a state-run enterprise and transform into a private company under its new status, it will pay taxes and dividends to its shareholders like other companies.
Excitingly, one of the things that will be different in the NNPC transition is that it will become a commercially oriented and profit-driven national petroleum company independent of government and audited annually.
Going forward, the NNPC would be managed like a private sector enterprise and unlike previously when it was owned by the government, the NNPC is expected to become more efficient in its operations. This will enable the Company to effectively maximize returns on investment for the 200 million Nigerians, ensure returns for shareholders and pay taxes to the government.
Where there is an impact of its operations on prices of petroleum products, the government will be expected to determine how the differential will be managed. What this implies is that impact of prices will not automatically be transferred to the citizens as the government remains committed to providing energy security and sustaining the economy.
Going by the transitioning, the NNPC’s operations will not be subsidised by the government because as a CAMA Company, it would be expected to pay dividends to shareholders which in this case is the government.
Kyari provided more understanding to this when he said recently that the National Oil Company will serve as a holding company for all its subsidiaries in the post PIA era.
He said, “So, these shareholders can decide, as the law provides that over time, they can reduce the shareholding into some private shareholding. That means it can be floated subsequently as a company that is quoted on the stock exchange. The intention at the very onset is not to go to that step but there is provision in the law that allows us ultimately to sell shares of this company.
“This is very simple. This company will pay taxes and royalties, which are revenues that accrue to the federation. So, every part of this country and every sub national institution or government will benefit from it.
“Secondly, this company will pay company income tax that also comes to the federation for the benefit of all. So, what is different is that this company will now have profit to make and declare dividend, which will be decided by the board of directors of this company.”
The new NNPC is also expected to enter new investments and partnerships in upstream assets to increase gas production in line with the decade of gas agenda.
Already, the NNPC had secured a $5bn corporate finance commitment from the African Export Import Bank to fund major investments in Nigeria’s Upstream sector.
The NNPC’s $5 billion corporate finance commitment from Afreximbank is seen by oil industry stakeholders as a dividend of the Petroleum Industry Act and the incorporation of the NNPC as a limited liability company.
Under the NNPC Ltd funding strategy for selected upstream investments, the Company would be raising between $3.5bn and $5bn as corporate finance to fund major upstream investments.
To NNPC would be taken over ownership from non-investing partner through acquisition of pre-emption rights in the sample Joint Venture and the strategy would also see the company investing in assets to address integrity, bottlenecking and growth issues including rig-less activities, and drilling campaigns in the oil industry.
The funding would also be used to finance part of the NNPC’s investment including acquisition of interest in quality upstream oil and gas producing assets.
Going by the projections of Kyari, the NNPC will soon emerge the fifth largest gas producing in the world given that the new legislation has provided business opportunities that will enable the NNPC earn more revenue for the country and attract foreign direct investment into the Nigerian energy sector.
In this new dispensation the NNPC is better positioned to play its role in ensuring energy security for the country.
Nigeria launched its decade of gas in February last year in a move to transition into clean energy and as well eliminate energy poverty, eating up about 40 per cent of its population.
The NNPC is currently deepening natural gas utilisation to reduce energy poverty through the National Gas Expansion Programme and intensifying the use of petrochemicals and also making concerted efforts in the Gas sector through various projects such as NLNG Train 7, AKK, OB3, ELPS and others.
It is also involved in the expansion and integration of domestic/regional power grids and growing the domestic gas markets through Autogas/Compressed Natural Gas/Liquified Petroleum Gas to power vehicles.
The GMD, hailed President Muhammadu Buhari, for having the courage to ensure that the PIA, despite various opposition, becomes law.
He said over 50 years, the country has been struggling with fiscal and regulatory framework in the oil and gas sector that were uncompetitive.
Increase Crude Production, Forex Will End Fuel Scarcity – NNPC
Kyari said that over the years, the passage of the PIA was resisted by stakeholders in the oil and gas industry for selfish reasons.
He said, “I am sure all of us are aware of the struggles that we ‘ve had to ensure we have the right fiscal and regulatory framework in place to make sure that companies operate in the best environment that is possible and very competitive.
“We have struggled to have the right fiscal space not just for 20 years but since 1967. As you may be aware, the Petroleum Profit Tax Act 1967, the Petroleum Act 1969, there wasn’t any significant change from what you have from the Petroleum Tax Act and the Petroleum Act.
“This means that we have frozen our environment for over 50 years, and that took its toll which is very visible in our recent history in the sense that in the last ten years, investment inflow in Sub-Sahara Africa and other countries into Nigeria has been just about $3bn to $3.5bn in real terms.
“Not just in spendings that we are seeing, in real capital expenditure that are designed to improve on production. And the reason is very simple, we don’t have the right fiscal structure, we don’t have the right climate, we don’t have the right regulatory stability, right framework where people can predict what will happen next.
“And that’s why there is under investment, there is lack of growth, and of course it produced some other results part of which is that many of our partners now both the dependent and independent have not invested substantially.
“Nobody invested in new projects. And the end results were that when you get to some of these facilities, you will think that you are in a war zone. Many of them looked like museums and they are not design to function.
“I don’t want to mention names of companies but we know that in every major facility, except the new ones that are just being put in place, you just discovered that something is wrong.
“And all this is because there isn’t the right framework for business and they don’t have faith in our fiscal system and that does not justify why we did the little we have done.
“The reality is that is what led to the situation today. But thank God, prosperity was thrown at us and with all humility, let me put it straight that without a President Buhari, we would not have had a PIA.
“Because over the years, the passage of the legislation was resisted by the industry, by the independent, dependent and the NNPC and sometimes for very simple reasons that people will lose power, people will lose control and people will lose influence. And this makes us to keep struggling over little issues.”
