NNPCL: Long-term strategic imperative (part two)

This is a follow-up article to last week’s, which proposed a long-term strategic turnaround for the Nigerian National Petroleum Company Limited (NNPCL) based on the privatisation of the entire organisation to take about a decade, following the British Petroleum (BP) privatisation model, which took nine years. The first steps would be to privatise the midstream and downstream subsidiaries of NNPCL, followed by the privatisation of the upstream assets at a later date within the ten-year time frame, with all the assets owned by Nigerian citizens. The primary objectives will be to minimise or eliminate waste, improve efficiency, institutionalise sound governance structures and refocus NNPCL squarely on growing the upstream oil and gas assets of Nigeria as rapidly as possible and ensuring optimal benefits from them for the nation. NNPCL can best achieve these objectives by being wholly owned by a broad-based Nigerian private shareholder base, without political interference. NNPCL can remain a ‘national oil company’ vigorously pursuing Nigeria’s national interests in the upstream oil and gas sector without necessarily being owned by the government.

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This article focuses on the need to privatise the midstream assets of NNPCL – the four technically inoperable refineries in Port Harcourt, Warri and Kaduna. The article will not be presumptuous in any way. I humbly submit that the technocrats and workforce who run the affairs of NNPCL and the refineries are eminently qualified and experienced professionals who know better what the problems and solutions of the four refineries are. However, a complex web of issues and considerations may not allow or enable them to come out straight with the most technically efficient solution to the challenges facing the refineries. But as a Nigerian economist and patriotic citizen with strong vested interests in the turnaround of the Nigerian oil and gas industry and the Nigerian economy at large, I am persuaded that the best long-term solution to the problem of the four NNPCL refineries is to sell or dispose of them and for NNPCL to exit the midstream oil and gas sector as part of its long-term strategic repositioning.

So many Nigerians in the public and private sectors and civil society have expressed their thoughts about the challenges facing the four troubled NNPCL refineries and the cost to the economy:

· Mr Aliko Dangote reportedly said in July 2025 that the NNPC refineries may not work again after $18 billion was spent on them since 2007, when he and other investors returned them after an earlier decision to sell the four refineries to him and other investors for $750 million by President Olusegun Obasanjo in January 2007 was reversed by his successor, President Umar Musa Yar’adua.

“NNPCL can remain a ‘national oil company’ vigorously pursuing Nigeria’s national interests in the upstream oil and gas sector without necessarily being owned by the government.”

· In a plenary session at the Nigerian Senate on Thursday, January 30, 2020, Senator Ibikunle Amosun alleged that $25 billion had been spent on the rehabilitation of the four NNPC refineries in the previous 25 years (1995-2020). The immediate focus of the plenary was a resolution to probe the Nigerian National Petroleum Corporation (NNPC) over $396 million expended on turnaround maintenance of refineries in the country between 2013 and 2015.

· Reuters reported on May 31, 2023, that an outgoing member of the House of Representatives said in Abuja that Nigeria spent more than 11.35 trillion naira ($25 billion) on fixing the country’s three moribund refineries in the past 10 years. The outgoing legislator called for a forensic audit of the matter.

· Economy: The online newspaper Economy Post alleged that NNPC spent N16.7 trillion on the turnaround maintenance of the nation’s three refineries between 2002 and 2022, according to a competent source close to the national oil company. The source who has worked in two of the three refineries explained that turnaround maintenance had become “an ATM of senior NNPC and refinery officials,” noting that “they know that the refineries cannot work but are enriching themselves with those contracts.”

· According to the Nigerian Natural Resource Charter (NNRC), a nonprofit policy institute, NNPC spent $396.33m between 2013 and 2017 to carry out repair works under the Turn Around Maintenance (TAM) scheme on its refineries.

· On March 17, 2021, the Federal Executive Council (FEC) approved the rehabilitation of the 61-year-old Port Harcourt Refinery at a cost of $1.5b, followed by the 46-year-old Warri and 44-year-old Kaduna refineries for $1.4b,

· A former Group Managing Director of NNPC, the late Dr Maikanti Baru, said in January 2019 that the nation’s refineries had not undergone full Turn Around Maintenance (TAM) for an aggregate of 42 years combined. (Emphasis: Full TAM)

Does the statement by the late former GMD of NNPC belie or contradict most of the allegations and claims about funds spent on the maintenance of NNPC refineries over the past decades? Not necessarily. Certainly, billions, enough to build a major refinery, have been spent without good results to show for it.

Below are some timelines of NNPC refineries’ TAM over the years:

· Port Harcourt Refineries: 1991, 1994 and 2000

· TAMs done between 2000 and 2010 were largely unsuccessful, a period of neglect and poor governance.

· In 2011, the Federal Executive Council (FEC) approved $1.5 billion for rehabilitation for a period of 44 months.

· In March 2021 FEC approved $2.9 billion for the rehabilitation of the four refineries.

Reasons for inconsistent TAM and poor results:

· Lack of transparency in the management of NNPC and its assets.

· Political interference and loss of financial autonomy in the 1990s when its commercial bank accounts were moved to the Central Bank of Nigeria.

· Political interference in the choice of TAM contractors

Read also: NNPCL gets ₦318bn for frontier oil search in eight months

The picture painted above is that of a poorly financially and technically managed oil and gas sector public enterprise, especially a Nigerian oil and gas public enterprise. We all know the history of poorly run public enterprises in Nigeria, even where their counterparts in other countries are profitably run. Two cases in point will suffice: the failed Nigeria Airways versus Ethiopian Airlines and NNPC versus Saudi Aramco, which in August 2023 dethroned Apple as the world’s most profitable company.

This brings us to the most critical factors responsible for the historical poor performance of NNPC: government ownership and political interference. It is wrong and even unfair to stigmatise and demonise the technocrats and employees at NNPC as incompetent and corrupt. They could be, but it is the ‘Nigerian public enterprise syndrome’ created within NNPC that is at work.

There is no amount of turnaround management or even the construction of entirely new refineries in place of the technically moribund ones that can solve the key problem of political interference in the management, which is the main reason why the only viable long-term solution for the refineries is to privatise them.

 

Mr Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos.