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Nigeria’s Behemoth State Oil Company Sheds Cloak of Secrecy

  • NNPC publishes audited accounts for first time in four decades
  • Before now the company has been dogged by allegations of graft and mismanagement

Nigeria’s powerful state oil company, whose finances and operations have been shrouded in secrecy for decades, is opening itself up to greater public scrutiny.

The Nigerian National Petroleum Corp. on June 14 published its 2018 annual report, which contained an audited account of all its 20 units for the first time in its 43-year history. The 2019 figures are set to be divulged in “coming months” and the company has pledged to make their release a tradition.

The significance of those developments is underscored by the NNPC’s overarching dominance of Nigeria’s oil industry, which is Africa’s largest and generates about half of all government revenue. It operates joint ventures with international energy companies that produce most of the nation’s crude and operates units that supply fuel to its more than 200 million people. It also has outright control of leases to offshore blocks that contain two-thirds of Nigeria’s oil reserves.

“The NNPC used to be the very definition of opacity,” said Waziri Adio, head of the Nigeria Extractive Industry Transparency Initiative, which was set up in 2005 when the government signed up to a global drive to improve disclosure of revenue generated from oil and minerals. Its commitment to improved disclosure is good for transparency and accountability and represents “a major milestone not just for NNPC but for the oil and gas sector in Nigeria,” he said.

Its history is replete with allegations of misappropriated funds and questionable dealings, including the allocation of oil blocks to politicians, the flouting of due process in the awarding of multi-billion dollar contracts and the withholding of taxes. NNPC didn’t properly account for at least $22.7 billion earned from the sale of oil leases and dividends from its 49% stake in Nigeria LNG Ltd. over a 15-year period through 2016, according to Neiti. NNPC has consistently denied any wrongdoing.

The July 2019 appointment of Mele Kyari, a former head of NNPC’s oil-trading unit, to lead the largely dysfunction company has given impetus to its push to become more transparent and market-focused.

Kyari has committed to putting an end to any questionable dealings and has overseen the introduction of an open-data policy that will give the public access to aspects of its operations that previously weren’t open to scrutiny, NNPC spokesman Kennie Obateru said.

Price Slump

Cheta Nwanze, an analyst at Lagos-based SBM Intelligence, sees a recent collapse in crude prices as a key driver of reform, because NNPC is no longer the cash cow it once was and its ability to divert funds has been substantially diminished.

The company’s investment management unit, its most profitable, reported revenue of 5.04 trillion naira ($13 billion) and a profit of 1.01 trillion naira in 2018 but its four decrepit refineries bled cash, reporting a 154 billion naira loss. It didn’t publish consolidated results.

Seun Onigbinde, who runs BudgiT, a Nigerian non-governmental organization that tracks official spending, sees greater transparency as but a first step toward a necessary overhaul of the entire company.

“The underlying issues still remain a bloated corporate structure, investments in loss-making entities such as refineries and its conflicting mandates as a participant and regulator,” he said.

SOURCE: Bloomberg