Like Saudi Aramco, NNPC Ltd under Kyari is creating value for Nigerians

By Ifeanyi Onuba

When Mallam Mele Kyari assumed the position of Group Managing Director of the now-defunct Nigerian National Petroleum Corporation (NNPC) on July 7, 2019, the corporation was in a near-comatose state. It was burdened with many challenges, such as persistent oil pipeline vandalism, incessant oil thefts, low production levels, lack of transparency and accountability, and huge operational losses.

Then, a report by Transparency International and Revenue Watch Institute found that the NNPC, which it was known in 2019, had the poorest transparency record out of 44 national and international energy companies examined

These scenarios fundamentally put Kyari on the spot. Kyari’s appointment, however, came as a game-changer with a clear mission—to revitalize the struggling corporation it was known for then and send an unequivocal message that the corporation’s lukewarm governance narratives of the past are gone for good.

Within days of his appointment, Kyari unveiled his “Roadmap to Global Excellence” anchored on the TAPE Agenda. TAPE represents transparency, accountability, and Performance Excellence, the concept was hitherto unknown in the company. He led NNPC from a loss-making company to a profitable one in the year 2020 when, for the first time in its 44 years of history, NNPC declared a profit after tax of N287 This went up to N674bn Profit After Tax in 2021.

With a vision boldly anchored on the principle of Transparency, Accountability, Performance and Excellence (TAPE), Kyari, under the defunct NNPC, demonstrated a fundamental grasp of what he needed to do to reposition the oil company and in June 2020, for the first time in 43 years, the Kyari-led NNPC released the 2018 Audited Financial Statements.

This was followed by another release of the Audited Financial Statement in 2019. The release of the accounts of NNPC was strange at that time but Kyari made sure it was done as it allowed the public to scrutinize what was going on at the NNPC, a development that made him to earn plaudits for the corporation from members of the public.

In August 2021, the NNPC declared a N287bn Profit After Tax (PAT) for the 2020 financial period for the first time in 44 years. Kyari’s magic wand played out as the corporation in the financial year of 2021 when the corporation’s profit grew to a profit level of N674bn.

The NNPC Group’s investment strategy under the leadership of Kyari proved resilient and enabled the National Oil Company to deliver favorable outcomes as shown by the 2021 financials.

The 2021 financial year made it the fourth consecutive years that NNPC Ltd, under the visionary leadership of Kyari, made its Audited Financial Statement public. This was one of the innovations made by Kyari when he took over the helms of affairs of the National Oil Company in 2019, and it paid off with an impressive financial performance of N674bn in 2021.

The NNPC Ltd in 2022 continued to show resilience by increasing its profitability despite the harsh operating environment that has constrained many businesses in Nigeria.

From a loss position of N1.7bn in 2019, the management of the NNPC reversed the trend by posting profit of N287bn in 2020, N674.1bn in 2021, N2.54tn in 2022 before hitting the current figure of N3.29tn in 2023.

This means that within the last four years, NNPC Ltd, under the leadership of the Group Chief Executive Officer, Mele Kyari, has made N6.8tn in profit.

Also, the company’s earnings rose significantly as revenue in 2023 was N23.99bn, representing an increase of 1,344 percent when compared with the N8.81bn in 2022.

The huge revenue inflow translated into a significant improvement in gross profit rising by N4.92tn to N7.03tn in 2023 as against the N2.11tn recorded in 2022.

This further boosted the level of NNPC Ltd’s profitability as Profit Before Income Tax rose by N4.18tn to N5.98tn in 2023 from N1.8tn in 2022.

As a result of the improvement in profitability, income tax paid to the government for the 2023 financial period also rose by N1.87tn from N717.07bn in 2022 to N2.69tn

The shareholders of NNPC Ltd also received a final dividend of N2.1tn, which translated into a dividend payout ratio of 80 per cent during the 2023 financial period.

What this means is that through the N2.69tn tax paid to the government and the N2.1tn dividend payout, NNPC Ltd has been able to provide liquidity of about N4.79tn to the federation.

Through his TAPE initiative, Kyari has also returned the NNPC to the path of transparency and accountability. This is evident in the report of the joint independent auditors of the financial statement.

The report was jointly audited by three renowned accounting firms such as PriceWaterHouseCoopers, SIAO Partners, and Muhtari Dangana and Co. Chartered Accountants.

In their joint audit report, the Auditors attested to the level of transparency and accountability of the books of accounts of NNPC Ltd. According to the auditors, the consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of Nigerian National Petroleum Company Limited and its subsidiaries as at December 31, 2023, and of their consolidated and separate financial performance and their consolidated and separate cash flows for the year ended in accordance with International Financial Reporting Standards.

Part of the report reads, “In our opinion, the consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of Nigerian National Petroleum Company Limited and its subsidiaries as at 31 December 2023, and of their consolidated and separate financial performance and their consolidated and separate cash flows for the year then ended in accordance with international financial reporting standards as issued by the International Accounting Standards Board and the requirements of the Companies and Allied Matters Act and the Financial Reporting Council of Nigeria (Amendment) Act, 2023.”

The opinion of the independent auditors of the financial statement of the NNPC Ltd is a testament to the Company’s commitment to transparency and accountability and the financial performance reflects both the strategic foresight and operational resilience of the NNPC Ltd.

Despite mounting operational and economic challenges, NNPC Ltd, since becoming a CAMA company in 2021, has shown that it is ready to compete among its peers globally.

The leadership of Kyari has also improved the productivity and financial performance of NNPC Ltd.

Also, posting such impressive returns has further demonstrated the NNPC Ltd’s commitment to sustaining profitability and supporting the attainment of national energy security as stipulated by the Petroleum Industry Act 2021, and by extension, as expected by the Company’s shareholders.

NNPC Ltd has also been carrying out investments in critical assets to boost the value creation for its shareholders and also guarantee energy security for Nigerians.

Kyari’s magic in growing crude oil production from less than one milkion barrels per day few years ago to about 1.8 million barrels oer day with potentials to hit two million barrelsperdayby Decemberthis year.

Similarly, NNPC Ltd’s investment strategy under the leadership of Kyari is yielding results as it has reduced oil production costs from $30 per barrel to about $25 per barrel. This is expected to maximise returns for Nigerians through improved profitability.

The NNPC Ltd, under the leadership of Kyari, had adopted the Saudi Aramco’s model of using video surveillance to monitor its pipelines carrying crude oil from wells to flow stations in the Niger Delta.

The NNPC Ltd, in collaboration with security agencies, has also put up a control center to provide surveillance of all the country’s oil and gas assets in the Niger Delta.

The surveillance system is known as the Central Coordination, Data Integration, and Activation Control Room. Just like the Saudi Aramco, the NNPC Data Control Center uses video visibility to monitor the country’s Niger Delta pipeline networks, where more than 90 percent of the country’s crude is explored

It is noteworthy that Kyari worked tirelessly to ensure the passage of the PIA, which empowered NNPC Ltd to operate like every private company in Nigeria with exemption from the Fiscal Responsibility Act, Public Procurement Act and TSA in order to ensure there are no excuses for failure.

The last five years of NNPC Ltd under Kyari have been momentous for the oil industry and for Nigeria’s economic wellbeing and with the latest record-breaking performance, the NNPC Ltd has shown that it has the potential of leading Nigeria towards a future of energy sufficiency, while playing in the big league with other energy powerhouses of the world like Saudi Aramco.

Onuba is a chattered accountant, and he wrote in from Abuja.