Buhari Elated as NNPC Breaks Jinx, Declares N287bn Profit, First in 44 Years

*Directs timely publication of corporation’s audited accounts
*Explains how feat was achieved
*Kyari: Before PIA, Nigeria’s oil industry was in bad state
*Cuts timeframe to recoup investment in Dangote Refinery from five to three years
Deji Elumoye and Emmanuel Addeh in Abuja

President Muhammadu Buhari yesterday hailed the Nigerian National Petroleum Corporation (NNPC) for declaring a Profit after Tax (PAT) of N287 billion for the year 2020, the first in its 44-year history. Buhari stressed that NNPC’s losses were reduced from N803 billion in 2018 to N1.7 billion in 2019.

This is just as the corporation yesterday attributed the historic profit it recorded in its 2020 Audited Financial Statement (AFS) to the adoption of cost-cutting measures, which hit about 30 per cent in the last two years.
However, president has directed the corporation’s management to ensure timely publication of its audited accounts.

Special Adviser to the President on Media and Publicity, Mr. Femi Adesina, in a statement quoted Buhari to have said the directive was in line with an earlier pledge by the federal government to publicly announce the financial position of NNPC.
Buhari, who doubles as Minister of Petroleum Resources, disclosed that the profit was made possible by the prudent management of the country’s resources.
Buhari said, “I am pleased to announce the declaration of Profit after Tax of N287 billion in year 2020 by the NNPC. This is sequel to the completion of the statutory annual audit exercise for year 2020.

“The NNPC losses were reduced from N803 billion in year 2018 to N1.7 billion in year 2019 and the eventual declaration of net profit in year 2020 for the first time in its 44-year history.

“This development is consistent with this administration’s commitment to ensuring prudent management of resources and maximisation of value for the Nigerian people from their natural resources.”

The president said to take NNPC to the next level, he had directed that all the financial statements of the corporation must be promptly released.
He congratulated the NNPC board for a job well done.

The president stated, “I have further directed the NNPC to timely publish the audited financial statements in line with the requirements of the law and as follow-up to our commitment to ensuring transparency and accountability by public institutions.
“I congratulate the board, management and staff of the corporation and look forward to greater value creation for the Nigerian people.”

For the first time since its establishment, NNPC, in June and October, respectively, last year, made public its Audited Financial Statement (AFS) for 2018 and 2019. It noted in the documents that were released five months apart that it had achieved a 99.7 per cent reduction in its loss profile from a whopping N803 billion in 2018 to N1.7 billion in 2019.

Although, a number of the corporation’s over 20 subsidiaries recorded losses, the general administrative expenses of the national oil company witnessed a 22 per cent decrease, from N894 billion in 2018 to N696 billion in 2019.

Some of the corporation’s subsidiaries, which posted improved performance in its last audited results, included the Nigerian Petroleum Development Company Limited (NPDC), which recorded N479 billion profit in 2019, compared to N179 billion in 2018, representing a 167 per cent increase. In addition, the Integrated Data Sciences Limited (IDSL) recorded a N23 billion profit in 2019, compared to N154 million in 2018, representing over 14,966 per cent increase, while the Petroleum Products Marketing Company (PPMC) recorded N14.2 billion profit in 2019, compared to N9.3 billion in 2018, representing 52 per cent increase.

NNPC Explains How Feat Was Achieved

Meanwhile, the NNPC has attributed the N287 billion profit recorded to its adoption of cost-cutting measures.
The Group Managing Director of the corporation, Mallam Mele Kyari, told journalists at the headquarters of the company in Abuja that the national oil company had adopted drastic changes in the way its business was conducted before now.

Kyari, who spoke alongside board members of the corporation, who were also joined virtually by the Minister of State, Petroleum, Chief Timipre Sylva, explained that the efforts of the corporation to embrace transparency and accountability encouraged by President Buhari, had started paying off.

The GMD said he attempted to bring in a new perspective in the running of the national oil company and built on what he met, ensuring more efficiency by automating the company’s processes and systems as well as choosing wisely what to invest in.

Added to those factors, the NNPC boss stated that the corporation had also been focusing on staff welfare, saying happy workers would ultimately deliver on the objectives of the company.

“The first principle of course is elimination, that is, you don’t buy what you don’t need. And we simply stopped buying what we didn’t need. Also, during the particular fiscal year 2020, whoever we engaged on all our contracts, we insisted on cutting costs by at least 30 per cent.

“This worked and we were able to pull down most of our procurement costs by 30 per cent. We saw the opportunity to be much more efficient by automating our systems and processes and that made us faster and also ultimately it reduced so much of logistics costs that ordinarily would have been additional costs to our business,” he noted.
He admitted that although there’s more work to be done, he remained proud of his team at the corporation, maintaining that history had been made by the NNPC.
According to him, the NNPC has now turned the corner from being a loss- making business that would look to improve on its performance especially under the Petroleum Industry Act (PIA).

“This is a very proud moment for us, because to our shareholders we’re no longer declaring losses. As a matter of fact, just like last year as we moved from loss level of N803 billion in 2018, we reduced it to N1.7 billion in 2019.
“And in the 2020 fiscal year, we’re making profit after tax of N287 billion. This is no doubt a huge progress, but by no means sufficient,” he said.

On the changes made by the corporation, he said: “There are very drastic changes to the way we do our business. One is to cut cost, to be more efficient, and also to ensure that this company is transparent and accountable to the Nigerian people.”
Earlier, Sylva praised the NNPC board and management over the feat.

He listed other similar achievements in the last few months as the passage of the PIA and the historic publication of the NNPC 2018 and 2019 accounts last year.
Meanwhile, Kyari has said the PIA had replaced some regulations enacted in 1969, which were already archaic. Kyari said the oil and gas industry was in a bad state before now.

The GMD, who spoke on a national television programme yesterday, credited the success of the new law to a clement legislative environment, which had aligned with the executive arm of government.

Kyari stated that because of the fiscal uncertainty that made the environment uncompetitive, of the about $50 billion new investments in the oil and gas, which came into sub-Saharan Africa in the last five years, only $3 billion came into Nigeria. He said investors were not sure what would happen if they brought their money to invest in Nigeria.

“Therefore, it is absolutely a new opportunity for the NNPC and its subsidiaries, because, henceforth, they have to justify their existence, as there will not be any patronage from the government or access to the resources of the state,” he stated.
Kyari argued that the energy transition did not mean that the world was eliminating crude oil completely, but projects would be done in such a way that carbon effects on the environment would be reduced close to zero.

“What the PIA is trying to do is to make Nigeria a much more attractive and clement business environment for people to put their monies into, while focusing on the development of gas in the domestic and the spot markets,” he maintained.
The NNPC helmsman, who also spoke on the corporation’s acquisition of 20 per cent in Dangote Refinery, further reduced the timeframe within which to recoup its about $2.7 billion investment from five years to about three years.

He said, “What I see is that there are a lot of misunderstanding around the NNPC proposed acquisition of 20 per cent of equity in Dangote Refinery. What is not obvious is that, first, the Dangote Group does not want the NNPC to take this equity.
“But the NNPC is just jumping in to take this equity. Again, no resource-dependent country, like Nigeria, will agree to allow such monumental project, with energy security implications, which has connection with fiscal security, to take place without having a seat on its board.

“Refinery is a very lucrative business. The government believes it can recoup its money within three years. Nobody is going to take government money to put into this project if not for the fact that it will benefit the people.”