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‘Stop The Attack, Kyari, NNPC Ltd Did No Wrong With $3bn Afreximbank Deal’

NNPC Group Chief Executive Officer, Mele Kyari

For the umpteenth time, the Nigerian National Petroleum Company Limited and its Group Chief Executive Officer, Mele Kyari have come under another attack through an article written by one Nasir Aminu with the caption, “Forex Gamble: The price of Kyari’s NNPC renewal.”

His jaundiced opinion of NNPC Management is anchored on one major objective – to remove Mele Kyari as the Group Chief Executive Officer.

In the last seven months, the NNPC has been made the “fall guy” by slothful critics because it appears that whenever anything goes wrong with the economy or any semblance of it, it must be blamed on the NNPC.

The writer started his article by accusing Kyari of the state oil company of “short-changing Nigeria in a loan triangle between the NNPC in Nigeria, an SPV in the Bahamas and the African Export–Import Bank (Afreximbank) in Egypt.”

He went on to state that Kyari stepped into the position of the Central Bank of Nigeria Governor to provide forex liquidity in the country.

If only the writer had done a little research, he would have been better informed to make more reasonable, objective assessment of the impact of the management of the NNPC under its Group Chief Executive Officer, Malam Mele Kyari.

But instead of making insightful arguments about the economic realities of the country, he chose to make the NNPC the fall guy by pushing the well-known subversive narrative that the problem of the company is the management.

“Let’s be clear: providing forex liquidity is the sole responsibility of the CBN Governor, not Kyari. But given that these are unprecedented times, we want to continue our import dependency. Desperate measures were needed.

“This is why the Tinubu administration allowed Kyari to conduct a business he was either inexperienced with or decided to deliberately use this avenue to short-change the country. Either way, he is complicit,” he wrote.

The fact that Aminu could make such sweeping generalizations about the management of any organization that had existed for decades is abstract, unintelligent, and showed that he had no regard for evidence.

It further showed that the writer had not researched his subject to know what has been going on with Nigeria’s oil giant. It’s unfortunate that in this age of internet search engines, a writer would be making comments on an important public institution like the NNPC Limited without availing himself of recent developments in that institution.

That the writer does not know that as a national oil company which manages Nigeria’s oil and gas reserves that provides 95% of the country’s foreign exchange earnings, the NNPC Limited plays a very strategic role in accretion of foreign exchange into the Nigerian economy shows his lack of understanding of the workings of the National oil company.

As Nigeria’s foreign exchange crisis heightened due to FX shortages to meet up with demands from the market, the NNPC had in August last year entered a deal with Afreximbank to secure $3bn which will be sold to the Central Bank of Nigeria to intervene in the forex market.

Foreign exchange pressures had led speculators to trade the naira at N920 per dollar on the black market while the official window closed at N762.71 on August 31 2023.

The deal was lauded by foreign institutions like JP Morgan Chase & Co and several Nigerian analysts, who said the $3bn is a quick fix that would alleviate the FX situation.

If the deal was flawed as claimed by the writer, renowned foreign institution such as JP Morgan would not say that it will boost foreign exchange liquidity into the country and prop up the value of the naira against the dollar.

For the record, JP Morgan had shortly after the deal was announced by NNPC said, “The President’s policy advisory council has recommended the government sell down its stake in the most joint-venture oil and gas assets, a proposal that is estimated to bring in up to $17bn. In addition, the recently announced $3bn loan to NNPC could help partly improve FX liquidity conditions in the market.

“We expect NNPC to sell the dollars to CBN and remit the naira proceeds to the government as upfront payments for oil revenues and taxes. That being said, the large external financing needs of the private sector will sustain FX pressure.”

For a renowned institution like JP Morgan to have taken this position as regards the NNPC deal with Afreximbank speaks volume. It is a confirmation of the well-known fact that the NNPC Limited, under the visionary leadership of Mele Kyari, is getting things right.

Aminu in his article, also struggled very hard to push another flawed narrative when he wrote that the deal is against the Fiscal Responsibility Act of 2007.

While referring to FRA’s Framework for Debt Management, Section 41, Subsection 1(a), he wrote, “Government at all tiers shall only borrow for capital expenditure and human development, provided that such borrowing shall be on concessional terms with low-interest rate and with a reasonable long amortisation period subject to the approval of the appropriate legislative body where necessary.”

It is bafling that a supposed commentator on Nigeria’s economy, particularly a strategic sector like the oil and gas industry, does not understand that the NNPC Limited is now a Limited Liability Company by virtue of the provision of the Petroleum Industry Act of 2021.

With its registration by the Corporate Affairs Commission as a Company under the Companies and Allied Matters Act, the NNPC Limited has been freed from the bureaucracy of government as its processes are now being run under a sound and transparent corporate governance practice.

If the writer had done a little research, he would have been better informed that flowing from the PIA, one of the things that is now different from the NNPC transitioning is that it is now a commercially oriented and profit-driven national petroleum company independent of government and audited annually.

What this means is that in terms of operations, the NNPC Limited is now being managed like a private sector enterprise and unlike previously when it was owned by the government, the NNPC Limited has become more efficient in its operations.

This has enabled the Company to effectively maximize returns on investment for the 200 million Nigerians, ensure returns for shareholders, and pay taxes to the government.

It is instructive to state that with the current level of improvement in crude oil production, the NNPC Limited now has the firepower to sell more dollars to the CBN for FX intervention.

Kyari gave credence to this while speaking recently when he said, “With the growing market and the prices that are good today, we know that the FX stability is well within sight, and NNPC is already making some FX payment into the transaction account.

“The Afreximbank deal is not a loan. It is a forward sale, and forward sales are easy deals.

“You are simply selling your item for tomorrow, and banks don’t have problems funding this. So, this is not a type of transaction that will ever collapse when it is fully clear that the volume that you are selling is already on the table and it is known to your partners.

“May I also point out that the industry, which is clearly a major source of FX for the country, as long as you don’t produce and export, you will continue to rely on exports coming from the only source of foreign exchange and this will grow as long as production grows and the market remains stable.

“The oil and gas industry has a huge potential and possibility of providing all the foreign exchange requirements of this country. We can’t do this except we are able to produce and also take into the market because we did have substantial challenges of security which I also confirm at this moment that Mr President has reengineered the security approach.”

The deal would also provide the federal government with dollars to aid liquidity to stabilise the naira via incremental releases based on the government’s needs. This is because stronger naira equals lower fuel costs, which is a major buffer against the need to re-engage in the subsidy regime.

Also, in his attempt to push his skewed narrative, Aminu also described the deal as a risky transaction.

“If not for the violation of the law, the NNPC would not be engaged in a loan triangle with an SPV in the Bahamas to pay Afrexim Bank in Egypt just to solve a problem they do not understand while using the powers outside their remit,” he wrote.

But what the writer failed to understand is the fact that the exposure for NNPC Limited in the deal was very limited, covering just a fraction of its entitlements, while there are no sovereign guarantees tied to the deal.

It must me stated that the deal will assist NNPC Limited to settle taxes and royalties in advance and would equip the federal government with the necessary dollar liquidity to stabilise the naira, with limited risk.

Rather than criticize with the sole objective of harming an institution or individual, it is more rewarding if criticisms from the likes of Aminu are done for the purpose of nation-building.

SOURCE: TheWhistler