My last week’s article was the seventh and concluding entry in the series on NNPCL’s long-term strategic imperatives. However, because of the feedback received that the title of each of the articles in the series ought to have been more expressive concerning its content and point of view, this article has become necessary. Also, last week, two key developments took place in the upstream oil and gas sector. The first was the unveiling of a broad outline of a restructuring plan that will give more access to major indigenous exploration and production companies to the upstream oil and gas assets of the Federal Government, since NNPCL has not been able to effectively develop these assets for optimal results. What this means in effect is that leading indigenous upstream companies will be given access to some oil blocks to develop alongside NNPCL, perhaps without necessarily having to bid for them, or bid for them under more liberal terms, in a new performance-based regime. Second is the plan by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to undertake another bidding round for oil blocks in December 2025. These two important developments may not be a mere coincidence. It could be that the proposed December bidding round is part of the government’s plan to offer more oil blocks to local exploration and production companies with a track record of high performance. These developments are certainly in line with my position that critical emphasis ought to be placed by NNPCL on the development of the nation’s upstream assets rather than on activities in the midstream and downstream oil and gas subsectors, which are distractions from NNPCL’s core mandate of expanding and developing our oil and gas reserves. It is also gratifying to note that as part of its strategic reset, NNPCL is planning to sell some of its shares to the Nigerian investing public, as well as to sufficiently improve the company’s performance to make it a source of pride to the nation.
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What follows is a succinct recap of all seven previous articles. The first article, titled “NNPCL: Long-term strategic imperative”, canvassed the need for the restructuring of the entire Nigerian oil and gas industry with a particular focus on the Nigerian National Petroleum Company Limited (NNPCL), which is due for a major shake-up in line with the overarching imperatives to reposition the entire Nigerian economy to make it competitive and growth- and development-orientated for the benefit of the Nigerian people and not the benefit of a few. In this regard, the article suggested that the long-term vision for the Nigerian National Petroleum Company Limited (NNPCL) should be to optimise Nigeria’s benefits from its hydrocarbon resources without necessarily being a public enterprise. This will mean the privatisation of the entire NNPCL and its subsidiaries along the path of British Petroleum over a ten-year period. This certainly will require great political will, anchored on strong leadership and consistent reform-minded economic policies over a period of a minimum of ten years.
The second article, titled “NNPCL: Long-term strategic imperatives (part two)”, was devoted to the need to privatise the midstream assets of NNPCL – the four technically inoperable refineries in Port Harcourt, Warri and Kaduna. I am persuaded, even now that the management of NNPCL is under intense pressure to find ‘technical partners’ to run the beleaguered refineries, that the best long-term solution to the problem of the four NNPCL refineries is to sell or dispose of them and for NNPCL to exit the midstream oil and gas sector as part of its long-term strategic repositioning. If the industrial unions in the oil and gas industry, PENGASSEN and NUPENG, are convinced the refineries are still operable, let them take up the challenge of running them through a Management Buyout (MBO) arrangement.
The third article, titled “NNPCL: Long-term strategic imperatives (part three)”, concentrated on the human and political dimensions, which are the core issues. It opined that if the NNPCL refineries had been owned by private concerns or managed professionally, without political interference, they would either have been sold a long time ago or made to work. For example, the Warri Refinery and the Kaduna Refinery had been shut down since 2004 and 2015, respectively, due to technical problems before the more recent turnaround management (TAM) beginning in mid-2021 involving all four refineries, for which a global sum of about $3 billion was expended to no avail. On the whole, as has been alleged by various sources, tens of billions of US dollars (USD) have been spent on turnaround management of these refineries in the last four decades with no tangible results. In short, these humongous amounts are enough to build four new refineries of the capacities of the present ones. The article concluded that the problems with the NNPC refineries are neither the management nor the technical competence of its Nigerian staff. Rather, three key factors are responsible for the poor performance of the refineries and NNPCL as a whole: government ownership, political interference and loss of financial autonomy since the 1990s. Except for these three factors, including government ownership, if they are removed, even if the existing inoperable four refineries are replaced with new ones, they will still fail woefully after a while.
“It is also gratifying to note that as part of its strategic reset, NNPCL is planning to sell some of its shares to the Nigerian investing public, as well as to sufficiently improve the company’s performance to make it a source of pride to the nation.”
The fourth article, titled “NNPCL: Long-term strategic imperatives (part four)”, focused on the need to privatise NNPCL’s downstream assets or how NNPCL could completely exit the downstream sector of the Nigerian oil and gas industry by selling off NNPC Retail Limited. The acquisition of OVH Energy Marketing Ltd by NNPCL went against the principle and global trend of privatisation because it involved a government business entity, NNPCL, acquiring an efficiently run private downstream oil and gas entity, which was reverse privatisation, and consolidating government control in an industry where there are a large number of efficiently run private sector operators. This is a loss because government-owned businesses, particularly in the oil and gas industry in Nigeria, are subject to inefficiency and political interference. The government should not be competing, selling petrol, in a crowded market of efficient private petrol retailers.
The fifth article concluded the argument of the fourth for NNPCL to exit the downstream oil and gas subsector and indeed privatise NNPC Retail Limited. It adduced four reasons NNPCL should offload NNPC Retail Ltd, including its loss of N395.5 billion in a single financial year in 2024, which demonstrated the huge loss-making potential of the company due to operational inefficiencies, lack of financial autonomy and political interference.
The sixth article zeroed in on the privatisation of the entire Nigerian National Petroleum Corporation Limited (NNPCL) and its subsidiaries, which will enable the company to focus more intently on its upstream operations to enhance the nation’s portfolio of oil and gas assets to the fullest, more productively and profitably, thereby optimising Nigeria’s overall benefits from its upstream hydrocarbon resources, guided by and aligned with the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) long-term strategic plan for the Nigerian oil and gas sector, the present administration’s Decade of Gas programme and the imperatives of energy security and sustainability.
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The focus of the seventh and concluding article was on how to go about privatising NNPCL as a corporate entity and commercial concern after first divesting it of the four petroleum refineries and its downstream asset, NNPC Retail Limited, as the articles have recommended. These recommendations are in no way a vote of no confidence in the ability and the professional competence of the Board, management and staff of NNPCL, as they are among the best trained and experienced to be found anywhere in the world, and it is obvious if they were to manage the company as a purely privately held commercial oil and gas concern, they would do many things very differently. This makes the privatisation of NNPCL truly an imperative, as it is within the context of a fully privatised NNPCL that the aspirations of a professionally and competently run NNPCL can be realised. The concluding article referred to the privatisation of British Petroleum, which was done by the United Kingdom government in four stages between 1977 and 1987.
We must, however, ensure that the recommended privatisation exercise will be transparent and broad-based, including professional and business interests in the oil and gas industry who have the technical and professional competence and business acumen to run the new privately held entity profitably and sustainably. Unyielding political will and sacrifice will be required.
Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos.
