The 2019 financial performance record of Nigeria’s state-owned oil corporation, NNPC, reveals a concerning trend of operational deficits from running the subsidiaries, including the three refineries. The combined loss from running the refineries was ₦50 billion with Warri Refining and Petrochemical Company documenting revenue of ₦921m, Kaduna Refining and Petrochemical Company Limited making ₦37m revenue, and Port Harcourt Refining Company recording no revenue.
On the other hand, some other subsidiaries – such as the National Petroleum Investment Management Service, NAPIMS – presented a strong commercial performance (Table 1). The publication, released in October 2020, reveals how the corporation is propping up billions of naira loss-making subsidiaries.
Table 1: Subsidiaries with returns (after tax)
| S/n | NNPC Subsidiary | Returns (After Taxation) ₦ |
| 1 | Duke Oil Company Incorporated | 12.6bn |
| 2 | Duke Global Energy Investment Limited | 226m |
| 3 | Duke Oil Services (UK) Limited | 45.2m |
| 4 | Integrated Data Services Limited | 23.2bn |
| 5 | N-Gas Limited | 2.2bn |
| 6 | Nigeria Gas Company Limited | 43.7bn |
| 7 | Nigerian Gas Marketing Company Limited | 10.1bn |
| 8 | NIDAS Marine Limited | 1.2bn |
| 9 | NIDAS Shipping Services Limited | 17.3m |
| 10 | NIDAS Shipping Service Agency (UK) Limited | 76.2m |
| 11 | NNPC Retail Limited | 2.6bn |
| 12 | NNPC Health Maintenance Organization Limited | 193m |
| 13 | Nigerian Petroleum Development Company Limited | 478bn |
| 14 | National Petroleum Investment Management Service | 2.83trn |
| 15 | National Engineering & Technical Company Limited | 2.8bn |
| 16 | Petroleum Products Marketing Company Limited | 14.2bn |
Another subsidiary of the NNPC, NIDAS Shipping Services Agency (UK) Limited, generated £940,101 (₦442m) in gross profit in 2019, but it incurred £1,098,353 (₦517m) in administrative expenses, leaving it with a £158,252 (₦74.5m) loss.
Figure 1: NIDAS Shipping Service Agency (UK) Limited Audited Financial Statement 2019
Source: NNPC 2019 Financial Statements
The financials of the subsidiaries, particularly regarding losses, equally reveals that other arms like Kaduna Refining and Petrochemical Company Limited tallied a gross loss of ₦15.7bn and administrative/operating expenses of ₦35.6bn, translating to ₦51bn loss. Port Harcourt Refining Company Limited‘s gross loss was ₦22.2bn, yet its administrative expenses totaled ₦25.1bn (₦47bn loss).
Warri Refining and Petrochemical Company Limited also recorded a gross loss of ₦12.3bn with administrative expenses of ₦37.6bn (₦49.9bn loss). Interestingly, Duke Oil Company DMCC recorded no revenue in 2019 but amassed administrative expenses of ₦3m.
Figure 2: NNPC’S subsidiaries with high administrative/operating expenses, 2019
Administrative Needs
The NNPC 2019 Audited Financial Statement disclosed a loss profile of ₦1.7bn and general administrative/operating expenses of ₦696bn. Still, a 99.7% reduction from ₦803bn loss profile and 22% dip from ₦894bn administrative expenses in 2018 doesn’t entirely solve the problem, said a Financial Analyst and head of one of Nigeria’s top finance and asset management companies. “I would prefer to see a distinct correlation between earnings and operating expenses,” he said.
Last year, Mr. Mele Kolo Kyari, NNPC’s Managing Director acknowledged that the corporation had failed to run its refineries profitably and said it was in the process of rehabilitating the refineries to be run by private companies in partnership with the Nigerian government. Almost two years later, the facilities are not any better.
While the monthly operational and financial performance data of NNPC’s subsidiaries remain under the purview of personal initiative and not under legal requirements, “The lack of a consolidated audited account statement for the NNPC meant the disclosure had provided an incomplete overview,” Oluseun Onigbinde of budgIT, a Nigerian transparency organization, said when the 2019 NNPC audited financial statement was released.
“We need to dismantle the whole monolith and allow the subsidiaries to try singly — that’s the only thing that will make NNPC more efficient. You have oil prices bleeding, state financials are not solid enough, the federal government has to step up and say it’s time to rebuild this,” he added.
Some Nigerians, however, think government agencies are a mixed bag for transparency and accountability when it comes to recording profits/losses and expenditures. Eze Hanson, a public servant and IT expert, said the digital era has ushered in new problems for government agencies.
“Many government agencies have trouble exploiting technology. Overwhelmed by data and the inability to centralize information, they are unable to produce accurate datasets. This often leaves them erring on the side of withholding information. It is not always deliberate,” Hanson said.
Key Takeaways
- In today’s highly competitive global oil market, how oil revenues are spent should be critically interrogated with strong emphasis placed on the extent to which they contribute to the nation’s budget and the role of stakeholders in the oversight of expenditures.
- Transparency in the awarding of contracts and disclosure of contract information is also critical in the oil and gas sector.
- The publication of NNPC’s financial statements and disclosures is an indication that transparency is becoming a common feature of the organization’s governance and management systems. These disclosures allow stakeholders, citizens, and the government to hold the NNPC accountable and help the corporation uphold its commitment to transparency and accountability.
- While NNPC’s decision to keep publishing its audited results has received commendations from relevant stakeholders, a cursory look at the 2019 audited report some irregularities.
The Increasing Pressure to Improve Earnings and Slash Administrative Expenses
Whatever the backstories, lack of transparency and accountability on how the country’s natural-resource revenues are managed can discourage civic discourse and grass-roots engagement with the government. Secrecy in financial and operational records carries a big cost and the public bears the expense. Most significantly, lack of transparency poses a major risk to good governance: When citizens are shut out and information is hard to get or not clear enough, government agencies like the NNPC can easily mask poor practices, corruption, fraud, avoidable losses, and abuse.
In assessing the quality of transparency and accountability in the NNPC’s management of Nigeria’s oil revenue, one can say that some progress has been made. However, the sustenance and stability of this new era of accountability depend on relevant initiatives like the Transparency Accountability and Performance Excellence (TAPE) agenda of the NNPC. Launched in 2019, TAPE is one major initiative that promises to boost transparency and accountability in the management of oil revenues. It is hoped that its five-step strategic roadmap for NNPC’s attainment of efficiency and global excellence will seek to effectively report on transparency and accountability issues in the management of oil revenues in Nigeria.
The proposed Petroleum Industry Bill (PIB) is also a major piece of legislation that would contribute to the maintenance of transparency and accountability on the part of the government, but the act alone is not sufficient to guarantee transparency. It is hoped that the PIB when passed, would ensure that proactive interventions are pursued on the part of the government and relevant policymakers.
However, for these interventions to be effective in Nigeria’s oil and gas sector, there has to be the willingness of public officials to comply with necessary policies and the existence of credible sanctions to punish those who do not comply with laid-down terms.
NNPC’s spokesperson, Dr. Kennie Obateru, was not immediately available to comment.
This story was produced under the NAREP Oil and Gas Media Fellowship of the Premium Times Centre for Investigative Journalism.