Preamble:
In 2015, I criticised the politically charged Board of the Nigerian National Petroleum Corporation (NNPC) appointed by President Muhammad Buhari, predicting inefficiency. From 2015 to 2019, the Nigerian Oil and Gas (NOG) sector showed poor performance, with few exceptions. Despite the Petroleum Industry Act (PIA) 2021’s potential, PMB again appointed a political Board for NNPC Limited, compromising its effectiveness. President Bola Ahmed Tinubu continued this trend, further weakening NOG performance. However, in 2025, PBAT finally followed PIA 2021’s Section 59:2(f) in appointing the NNPC Board, offering hope for improved performance. This op-ed aims to remind the new Board of the commercial goals of PIA 2021, emphasising adherence to the rule of law as essential for success.
Provisions and Goals of the PIA 2021 Act
The Petroleum Industry Act 2021 results from a comprehensive comparative review of the key performance indicators within the Nigerian Oil and Gas (NOG) sector and other relevant areas. This landmark legislation aims to transform the NOG sector by enhancing transparency, reducing bureaucracy, minimising stakeholder conflicts, and establishing an optimal legal framework for governance and improving the business environment. The Act delineates four commendable objectives to manage petroleum resources effectively and efficiently in Nigeria while upholding ethical standards and equity.
Firstly, it establishes governing institutions with specific roles pertaining to the petroleum industry in Nigeria, including policy and regulatory bodies such as the Minister of Petroleum, the Petroleum Commission, and the Petroleum Authority. Secondly, it transitions the Nigerian National Petroleum Corporation (NNPC) into a commercially oriented and profit-driven entity, NNPC, governed by the Companies and Allied Matters Act (CAMA), to optimise stakeholder investment value. Thirdly, the Act seeks to promote transparency and accountability in the administration and governance of petroleum resources in Nigeria. Lastly, it endeavours to foster a conducive business environment with a progressive, adaptable, and dynamic fiscal framework.
Although the Act’s imperfections may be subject to scrutiny, its merits are incontrovertible. The Board of NNPC is equipped with an admirable set of legal principles to guide decision-making. Adherence to these laws and the provisions of the Petroleum Industry Act 2021 will ensure that NNPC delivers substantial value to its stakeholders, including the Federal Republic of Nigeria.
Key Provisions of the PIA 2021 for NNPC Board’s Notice
The Petroleum Industry Act (PIA) 2021 establishes NNPC Limited (NNPC) as a limited liability company under the Companies and Allied Matters Act (CAMA), specified in Section 53. According to Section 53(3), the ownership of NNPC shares will initially be vested in the Government at incorporation. Subsequently, the Ministry of Petroleum Incorporated (MOPI) and the Ministry of Finance Incorporated (MOFI) will each hold an equal portion of all shares on behalf of the Federation.
There is no specification about the time or period for any sale or transfer of NNPC shares to interested stakeholders. Section 54(3) grants the Government exclusive rights to transfer or sell shares to interested parties, subject to endorsement by the National Economic Council on behalf of the Federation. Section 53(6) stipulates that the transfer or sale of NNPC shares must adhere to a reasonable value principle through an open, transparent, and competitive bidding process. PIA 2021 does not categorically state that NNPC will cease to be a state business enterprise. However, Section 53(5) allows for this possibility, subject to Government approval and endorsement by the National Economic Council on behalf of the Federation.
Section 53(7) mandates that NNPC and its subsidiaries conduct their operations commercially, profitably, and efficiently without reliance on government funding. NNPC must function as a CAMA entity, declare dividends to its shareholders, and retain one-fifth of its profits for business growth. This indicates the end of NNPC serving as a financial resource for the Federal Government, ending the practice of using its funds as receivables. Section 53(8) mandates NNPC to operate like any other company in Nigeria, making royalty payments, paying fees when due, distributing profit hydrocarbon shares, taxes, and other required payments to the government promptly.
Regarding the composition and appointment of the NNPC Board, Section 59(2) authorises the President of the Federal Republic of Nigeria to appoint members of the NNPC Board of Directors as outlined in Section 59(1). Section 59(5) specifies that the President’s power to appoint NNPC Board members ceases when NNPC is no longer wholly owned by the Government. Shareholders of NNPC will decide on the composition of the Board following CAMA provisions.
Section 60(1) mandates the NNPC Board to develop formal and transparent procedures for the creation of its committees as stated in Section 60(4(a-d)). The Board must apply corporate governance principles detailed in Section 61 of the PIA 2021, fulfilling the responsibilities listed in Section 63 by adhering to the highest standards and global business practices. Section 61 advocates for a shift from transactional to transformational leadership, suggesting an approach based on mutual respect and shared interests to achieve the aims of NNPC as described in Section 64.
Section 64(a) specifies that NNPC’s aim is to conduct petroleum operations on a commercial basis comparable to private firms engaged in similar activities within Nigeria. Consequently, the company is not subject to the Public Procurement Act, the Fiscal Responsibility Act, or the Treasury Single Account. Section 64 excludes traditional agency, policy, socio-political, regulatory roles, and quasi-fiscal activities for the Federal Government and the Federation. Thus, NNPC’s primary goal is commercial, focused on creating value and maximising shareholders’ value. This does not prevent NNPC from participating in Corporate Social Investment initiatives or pursuing renewable and other energy investments according to Section 64(h). Interpretations of Section 64(m) have varied.
The concept of incorporated joint venture companies, as outlined in Section 65, is voluntary for NNPC and other parties involved in joint operating agreements for upstream operations. Section 65 highlights the commercial objective of transforming NNPC into NNPC, emphasising that NNPC should not anticipate any government funding in the form of transfer payments. The aim is to make NNPC Limited financially independent without reliance on public funding, thus freeing NNPC from politically burdensome national budgetary processes.
Challenges and Solutions for NNPC Board’s Notice
The Nigerian National Petroleum Company Limited (NNPC) is facing various challenges affecting its operations and financial performance. These challenges include oil theft and pipeline vandalism, leading to significant production and revenue losses. Additionally, lower global oil prices and declining output are impacting on the company’s ability to meet its financial obligations. Oil theft costs NNPC approximately 200,000 barrels per day in lost revenue. Addressing this issue requires technology solutions such as smart meters, pipeline monitoring, real-time tracking, community engagements, including local involvement, economic empowerment, education, and awareness, and policy reforms such as strengthening regulatory frameworks, holding perpetrators accountable, enhancing collaboration with government agencies, and promoting transparency in crude oil transactions.
Fuel subsidy management remains problematic; political and public resistance has complicated efforts to remove subsidies, affecting cash flow and operational stability. Nigeria’s debt profile may impact NNPC’s financial performance due to debt servicing obligations. Operational inefficiencies stemming from ageing infrastructure, bureaucratic delays, and underperforming refineries limit NNPC’s productivity. The company faces criticism regarding transparency and accountability concerning dollar revenue and accounts receivable from the Federal Government and the Federation. Additionally, NNPC is managing debts owed to international oil companies (IOCs) and other partners, which constrain its financial flexibility.
NNPC is transitioning to a fully commercial entity under the Petroleum Industry Act (PIA) of 2021, requiring cultural and structural adjustments that have been challenging to implement. Relational issues need addressing with IOCs, IPPGs, and other PIA Institutions, such as the Petroleum Commission and the Petroleum Authority, including overlapping mandates, disputes over Joint Venture assets, transparency, revenue remittance, and pipeline and gas infrastructure management challenges. Efforts are ongoing to resolve conflicts through inter-agency collaboration and legal clarifications, but legacy practices and transitional ambiguities continue to pose difficulties.
Security concerns and external factors also present challenges. Instability in the Niger Delta disrupts operations, increases operational costs, causes loss of lives, environmental damage, and impacts regional and national economies. External factors include pressures from the global energy transition. As the world moves toward cleaner energy sources, investing in renewable energy would be prudent for NNPC. However, securing funding to optimise assets may become more difficult, yet the evolving energy landscape offers an opportunity to diversify its portfolio.
To enhance its operations, financial stability, and governance, NNPC should adopt a multi-faceted approach. Operational priorities should include refinery maintenance, improved pipeline security, and supply chain optimisation to increase efficiency and reduce losses. Financially, the company should strengthen revenue management systems, implement cost-cutting measures, and establish a clear debt management framework. Transparency and accountability are crucial; NNPC should publicly disclose financial and operational information, tighten internal controls, and engage stakeholders across government, civil society, and local communities. Strategic partnerships with international oil companies can provide access to technology, funding, and expertise, while investment in staff capacity building will enhance internal competencies. Close collaboration with government agencies is essential to navigate regulatory and policy challenges. These measures will enable NNPC to address its immediate challenges while laying the foundation for sustainable, long-term growth.
Concluding Remarks and Recommendations
This op-ed is an open letter to the Board of the Nigerian National Petroleum Company Limited (NNPC), highlighting the critical need to adhere to the Petroleum Industry Act (PIA) 2021 to enhance the performance of Nigeria’s oil and gas sector. President Bola Ahmed Tinubu’s decision in 2025 aligns with the rule of law as stipulated in Section 59:2(f) of PIA 2021. While the appointment of technically proficient individuals to the NNPC board is commendable, their competence alone may not suffice to improve the efficacy of Nigeria’s oil and gas sector. Hence, strict adherence to the legal provisions of the PIA and the appointment of technically skilled Board Members to oversee the two petroleum regulatory institutions could address some of the relational challenges facing the NNPC and these institutions.
Furthermore, appointing a designated representative for the oil and gas sector, known as the Minister of Petroleum, could enhance the NNPC Board members’ ability to fulfil their responsibilities, including addressing issues such as oil theft, fuel subsidy management, operational inefficiencies, and necessary cultural adjustments to meet PIA standards. The NNPC Board should strategically prioritise the commercial objectives outlined in PIA 2021 to ensure the success and sustainability of Nigeria’s oil and gas sector. This must be conducted in compliance with the highest standards, practices, and principles of corporate governance, as specified in Section 61 (1) of the PIA 2021.
The NNPC board is urged to fully comprehend the intentions of the Petroleum Industry Act (PIA), beyond its literal interpretation. Misinterpreting the intent of a law to suit institutional interests hinders reforms. The NNPC Board must empower the management and operational team, led by the GCEO, to act commercially and deliver value. The NNPC board must transition from a transactional leadership mindset to a transformational leadership approach in guiding the management and operational team. Transactional leaders manage processes closely, while transformational leaders change them through a shared vision.
In conclusion, it is emphasised that the shareholder of NNPC is the Federation, not just the Federal Government. The board and management team must act in trust for the entire Federation, as reflected in the geopolitical-zonal representation on the Board. Success is rooted in honesty, essential for maintaining confidence and the capability to perform. It is anticipated that the potential of Nigeria’s Oil and Gas Sector will be realised with realistic expectations and strategic patience. As Nigeria strives to diversify its economy and optimise hydrocarbon revenue, stakeholders will observe progress closely to see if targets result in tangible transformation.
Best regards for its value
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OMOWUMI O. ILEDARE, PhD, Sr. Fellow USAEE, Fellow NIPetE, Fellow EI, Professor Emeritus, Louisiana State University, Baton Rouge, USA & Executive Director, Emmanuel Egbogah Foundation, Abuja, Nigeria.
Email:wumi.iledare@iaee.org