Financial Energy Review
by Musa Ibrahim……….
The Coordinator of Nigeria Natural Resource Charter (NNRC), Ms. Tengi George-Ikoli has said that the Nigerian National Petroleum Corporation (NNPC), should improve on their transparency and accountability in line with the established global benchmark as well as its good corporate governance.
Nigeria Natural Resource Charter (NNRC), is a non-profit policy institute, committed to effective natural resource governance in Nigeria.
In a statement in Abuja, NNRC, however, commended the NNPC for its commitment to its Transparency, Accountability and Performance Excellence (TAPE) agenda, and its recent efforts by publishing the 2018 audited reports of its subsidiaries, noting, however, that there remains a need for greater transparency and accountability by the NNPC
She noted that over the years, the NNPC had consistently under-performed against the NNRC’s global best practice benchmark for optimal national oil company performance which prescribes that national oil companies be accountable to their citizens and government, with well-defined mandates and an objective of commercial efficiency.
She said, “Holistic improvements across the National Oil Company (NOC) will ‘require clear and appropriate decisions and role of the NOC and how it is financed, corporate governance systems that limit political interference and allow for efficient oversight, and a commitment to transparency and accountability.
“It is expected that the NOCs that will succeed in maximizing their potential enterprise value, and thus maximize their revenue contribution to the nation, will be those who succeed at building strong governance along with capital and operational excellence into their culture.”
She bemoaned the huge losses incurred by the country’s refineries, stating that unless NNPC’s refineries operate at a minimum of 90% capacity, they would continue to lose money.
“Comparing Norway’s Equinor and NNPC, performance records show that Equinor’s three refineries averaged 92.8 per cent capacity utilisation in 2018 while NNPC’s three refineries recorded 11.21 per cent. A 2015 comparison of average refinery capacity utilisation in the USA of 90.98 per cent and Nigeria of 4.88 per cent is even worse.
“In the area of revenues accruing to government, NNPC’s performance compared to Petrobras (of Brazil), or Petronas (of Malaysia) shows gross inefficiency. Even when benchmarked with similar national oil companies in Africa such as Sonatrach of Algeria and Sonangol of Angola, the NNPC still falls short on different counts,” she noted
George-Ikoli explained that the NNRC had highlighted poor corporate governance as a big challenge to the growth of the NNPC.
She said, “It is noteworthy that peer group companies that are wholly government-owned like the NNPC do have strong governing boards constituted by competent professionals, instead of a preference for political representation. The NNPC is the only NOC with a serving government minister on its board. This brings unintended political baggage which impacts negatively on the smooth running of the organization
Closely-linked to governance, management and delivery is the concern for organizational flux. Compared to other NOC’s the NNPC has had far more executive turnover. Unlike Petronas where the average tenure of a CEO is six years, and nine years in Saudi Aramco, NNPC, by contrast, has had 20 GMDs in 42 years, an average tenure of 2 years per chief executive.”
She noted that to reform the NNPC required new thinking and new strategies, starting with the recognition that NNPC is not and was never designed, from the beginning, to be a commercially driven Enterprise
“Had it been so, it would have been capitalised, granted more operational autonomy and burdened with fewer regulatory functions as in the NNPC Act. Its governing board would reflect that of a commercial enterprise, even if government-owned like Saudi Aramco, with fewer ‘political appointees’.
“No doubt the Petroleum Industry Bill will be a good platform to remedy the deficiencies in particular as it goes to greater lengths to separate commercial entities from regulatory authorities, leaving the national oil company to focus on finding, producing and commercializing petroleum resources,” she explained.
