History was made last week Tuesday, July 17, 2022 as Nigeria’s oil behemoth, the Nigerian National Petroleum Corporation (NNPC) transited from a public corporation to a limited liability company. The change came with a new name, Nigerian National Petroleum Company Limited and a new logo.
By the change, NNPC Limited becomes a fully commercialised entity with a management and board and now free from institutional regulations and bureaucracy. The company would by next year access the capital market to float its shares to the public. It will also no longer remit money to the Federation Accounts Allocation Committee for sharing to the three tiers of government monthly, as it was doing before. Rather, it will pay its taxes, duties and royalty to the Federal Government.
The new NNPC Limited is the outcome of the Petroleum Industry Act (PIA) signed into law last year by President Muhammadu Buhari.
The PIA created a regulatory environment that would ensure efficiency and accountability across the oil and gas value chain and repositioned NNPC to a commercially driven national petroleum company that would be accountable to the country.
The Act also provides for a direct benefit framework that will enable sustainable development of oil host communities, while also providing for the ending of gas flaring, which would facilitate the attainment of Nigeria’s contributions of the Paris Agreement through a funding mechanism to support gas flare out project in host communities.
It would also acknowledge the current global energy transition by making necessary provisions for the Nigerian National Petroleum Company Limited to invest in renewable energy.
While unfurling the new NNPC Limited last week, President Buhari said that the oil firm would from now on conduct itself under best international business practices, adding that the new NNPC Limited would be free from institutional regulations.
According to the President, the provisions of PIA (Petroleum Industry Act) 2021, has given the Nigerian petroleum industry a new impetus, with improved fiscal framework, transparent governance, enhanced regulation and the creation of a commercially-driven and independent national oil company that will operate without relying on government funding and free from institutional regulations, such as the Treasury Single Account, Public Procurement and Fiscal Responsibility Acts.
He added that the new entity would conduct itself under the best international business practice in transparency, governance and commercial viability.
The President said the government was transforming the petroleum industry to strengthen its capacity and market relevance for the present and future global energy priorities.
He said: “By chance of history, I was privileged to lead the creation of the Nigerian National Petroleum Corporation on the July 1, 1977. Forty-Four years later, I was again privileged to sign the Petroleum Industry Act in 2021, heralding the long-awaited reform of our petroleum sector.”
The President further noted that coincidentally, “I, on July 1, 2022 authorised transfer of assets from the Nigerian National Petroleum Corporation to its successor company, the Nigerian National Petroleum Company Limited, and steered the implementation leading to the unveiling of Africa’s largest national oil company today.
“I, therefore, thank Almighty God for choosing me to consistently play an important role in shaping the destiny of our national oil company from the good to the great.”
NNPC Limited, he said, would operate as a commercial, independent and viable National Oil Company (NOC) at par with its peers around the world, to sustainably deliver value to its over 200 million shareholders and the global energy community, while adhering to its fundamental corporate values of integrity, excellence and sustainability.
Mele Kyari, Chief Executive Officer, NNPC Limited, said at the unveiling last week in Abuja, that the firm was now a private outfit and has nothing to do with remitting money to FAAC anymore. “We will pay our taxes, royalties and deliver dividends to our shareholders,” he said.
Kyari said the new NNPC now has “a smarter, more responsive and much more accountable company that must act within the premises of all regulations that are in Nigeria for private companies,” adding that the company must also meet the standards of best practice in every industry in terms of governance, complying with regulations.
Kyari noted that the new NNPC Limited must add value to the investors, who must see dividends and deliver energy in the country. He said the firm would now make decisions very quickly, get the best class of people anywhere in the world, inject them into the company and get its Initial Public Offer ready by June 2023, saying that Nigerians will see a very different company in the coming days and months.
“We are convinced that by the mid of next year this company will be IPO ready,” Kyari stated, adding, “IPO ready means that you have systems and processes lined on the side of profitability and is a company that is accountable to its shareholders and stakeholders.”
He said government had transferred its assets to NNPC Limited and that the assets are big that nobody in the country and Africa has such an asset.
Kyari explained further that the new NNPC had no need for a sovereign guarantee, as lenders would only ask for such when the company seeking the loan lacked access to its assets.
“Today the assets are in our books and have been transferred to us. That is what banks are looking for, and that is the reason they ask for a sovereign guarantee,” the Managing Director stated.
On the fate of the old NNPC workers, Kyari assured that nobody would lose his or her job, stating that the company has manageable staff strength of 7,000, saying that with the planned expansion more people are going to be added to the workforce.
“The law has also provided that no one is going to leave this company. Everybody’s work is preserved, their benefits are preserved. So, there is no matter of concern for the employees of this company,” he insisted.
President Buhari had last year signed into law the controversial Petroleum Industry Bill (PIB) and quickly approved a steering committee to oversee the process of its implementation.
The Petroleum Industry Act provides legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities, and other investment-related issues.
The Senate passed the Bill, while the House of Representatives did the same and President Buhari signed it into law on Monday, August 16, 2021, thus ending a long wait for the law since the early 2000s.
When the PIA was passed into law it attracted both commendations and condemnation from various sections of the country, even as it generated many controversies.
While signing the Bill into law last year, Buhari said the country had lost an estimated 50 billion dollars worth of investments in ten years, because of the uncertainty of non-passage of the Bill, including lack of progress and stagnation in the petroleum industry.
He had given the steering committee 12 months to complete the implementation of the Act, directing all “relevant Ministries, Departments and Agencies of government to fully cooperate in ensuring the successful and timely implementation of the PIA.
The implementation process, which was headed by Minister of State, Petroleum Resources, Timipre Sylva, was charged by the president to consolidate the commitment of the administration to delivering the value proposition of the Petroleum Industry Law.
The president maintained that signing the Bill into law had become necessary in view of the fact that Nigeria runs a petroleum industry that is governed largely by laws enacted over 50 years ago, such as the Petroleum Act of 1969 and other obsolete legislations.
He said, “We are all aware that past administrations have identified the need to further align the industry for global competitiveness, but there was lack of political will to actualize this needed transformation. This lack of progress has stagnated the growth of the industry and the prosperity of our economy. In the past ten years, Nigeria has lost an estimated 50billion dollars worth of investments due to uncertainty created by the non-passage of the PIB.
“This administration believes that the timely passage of the Petroleum Industry Bill will help our country attract investments across the oil and gas value chain.’’
He commended the two chambers of the National Assembly for ensuring the passage of the PIB, noting that his signing of the Petroleum Industry Bill on August 16, 2021 to “Petroleum Industry Act 2021” marked the beginning of the journey towards a competitive and resilient petroleum industry that would attract investments to support the nation’s economic recovery and growth plan.
One of the areas of contention in the law was the five per cent of the actual annual operating expenditure of the upstream petroleum operators as fund for the establishment of the Host Communities Trust Fund.
While the Senate settled for three per cent (about $502 million) of the upstream oil and gas companies operational costs, its counterpart in the House of Representatives initially insisted on the provision of five per cent (about $502.8 million).
The conference report of both chambers, however, adopted the Senate resolution of three per cent. Both chambers also adopted the committee’s recommendation of 30 per cent profit of the proposed Nigerian National Petroleum Company (NNPC) to be dedicated to crude oil exploration in the Frontier Basins.
Kicking against the Law, the apex socio-cultural group, Pan Niger Delta Forum (PANDEF), and the Centre for Human Rights and Anti-Corruption Crusade (CHURAC), had criticised the President for disregarding the issues raised over a portion of the bill that ceded a paltry three per cent to Host Communities Development Trust Fund and 30 per cent of NNPC Ltd profit to Frontier Oil Exploration Fund.
National Publicity Secretary of PANDEF, Ken Robinson, in a statement, described the assent to the Bill by the president, as callous, repressive and insensitive to the plight of the Niger Delta.
“This PIB falls way short of the expectations of the oil and gas producing communities that bear the brunt of unconscionable industry operations. This assent by President Buhari simply speaks to the repugnant attitude of disregard, propelled by arrogance, disdain and contempt with which issues concerning the Niger Delta region is treated, particularly, by the present administration.
“What this act signifies is an unequivocal message to the Niger Delta people that how they feel and what they say do not count at all in the schemes of the Nigeria project. That’s insensitive, abominable and, therefore, unacceptable to the good people of the Niger Delta, the critical economic nexus of the entire Nigerian territory.
“The Niger Delta people will speak shortly after full consultations on this callous act on the best legal and political response,” he fumed.
Speaking in the same vein, CHURAC’s president/chairman, Board of Trustees, Cleric Alaowei, said the unusual speed by President Buhari in assenting to the Bill was suspicious and a sign that he was predisposed to doing the bid of a section of the country to the detriment of others.
“It appears President Buhari is yielding to the desires of a section of the country, especially the core northern supremacists. For us in the Niger Delta, the hasty signing into law of that rather repressive Act only marked another draconian legal regime where the region is being subjected to the whims and caprices of the inimical petroleum laws.
“Niger Delta people need 10 per cent equity share. Three per cent cannot remedy the despoliation of our environment occasioned by the years of unhindered oil exploration,” he said.
Also, communities in Rivers State, under the umbrella of the Coalition of Rivers Oil and Gas Host Communities (CROGHCOM), rejected the Bill and condemned the signing without first resolving the rifts in it or even putting into consideration the outcry of the people from the host communities to law in a press release in Port Harcourt.
CROGHCOM said: “We want to state very clearly that this PIB is just a rubber stamp of what the executive wanted, that’s why it’s been hurriedly passed and signed just like that.”
The statement, signed by chairman of the coalition, Barituka Loanyie, added: “We want our people and indeed the world to know that the meagre three per cent provided for the host Community Trust Fund as signed into law by the president is to be managed by the oil companies. It is like the case of the Niger Delta Development Commission (NDDC), where they give with one hand and take with the other hand.
“We reject this PIB because it does not scratch where it is itching us. This is complete injustice.”
Ijaw youths across six states of the Niger Delta region under the aegis of Ijaw Youths Council also lampooned President Buhari and the Minister of State for Petroleum, Timipre Sylva for the signing of the Bill into Law. They declared President Muhammadu Buhari who doubles as minister of petroleum and Timipre Sylva, persona non grata over the Petroleum Industry Act (PIA).
The group threatened that the duo were no longer welcomed in the region for their role in the passage and signing of the Petroleum Industrial Bill (PIB) into law, noting that despite the fact that the constitution guarantees the duo freedom of movement to any part of the country, they would be met with boos and jeers if they ventured into any part of the Niger Delta region for disregarding the plights and cries of the people of the region over the years.
IYC, which had earlier rejected the PIA, described it as a total affront on the people of the region, saying the decision not to welcome Buhari and Sylva was a further show of disdain for their drop in the ratings of the Niger Delta people and should not expect any accolades and congratulatory messages from the region.
National spokesman of IYC, Ebilade Ekerefe, in a statement in Yenagoa, Bayelsa State, insisted that the best course of action the president should have taken was to send the Bill back to the National Assembly for upward review of the three per cent equity share to host communities whose environments had suffered decades of oil exploration activities by the oil companies.
According to him, a substantial percentage to the host communities would have helped to address the age long criminality.
Ekerefe described the explanation offered by Sylva on the three per cent as an afterthought adding that what the minister should have done as an illustrious son of the soil was to apologise and appeal to the consciences of the people, rather than justifying an act which is politically tailored to favour the north and its allies in the industry.
The statement read in part: “With the amount of speed the president used in signing the PIB without recourse to the stand taken by stakeholders from the region, the president has further demonstrated that the opinions of the Niger delta people don’t matter in his government as we have witnessed in other areas that requires urgent attention of his government.
“In the light of the forgoing, there’s no better time for the people of the Niger Delta region to intensify the struggle for resource control and self-determination. We believe strongly that will be the only sure path upon which our God giving natural resources can be managed by us, and not this impunity we have witnessed from a repressive federal government under President Muhammadu Buhari.”
But Imo State Governor, Hope Uzodimma on his part commended President Muhammadu Buhari for the courage to ensure that the Petroleum Industry Bill was passed into law. He said that by assenting to the Bill, the President succeeded in breaking the jinx of the old 1969 Petroleum Act begging for amendment over the years.
“I am excited over the Petroleum Act. I commend the NASS and President Muhammadu Buhari for a job well done, and particularly Mr. President for breaking the jinx of the 1969 Petroleum Act as enacted,” the Governor said. Governor Uzodimma listed the gains of the Petroleum Act to include regulation of environmental hazards, creation of room for value addition to oil bearing communities and the oil companies, and generally, the ability to engender a value chain in the oil sector. He reasoned that 3% assented for the oil bearing communities should not be the focus of the Petroleum Act.
“All over the world corporate organizations have a responsibility to embark on Corporate Social Responsibility (CSR). We don’t even need a law for oil operating companies to know that when the community is not happy it will affect production.”
For his state, Uzodimma said the advantage is threefold and more – it will standardize oil production, regulatory instrument will be at work and the feeling of grievance of the host communities will be addressed.
He said: “Even if you didn’t get 10 per cent or more now as recommended, with further amendments, you will get them, but for now, there are many advantages that have come with the Petroleum Act. All the hazards that follow the production of oil, mostly environmental hazards are as a result of the absence of regulatory environment. These laws when put in place will not only regulate the environment but will also create room for value addition, both in the oil-bearing communities, the oil-producing companies and government loyalties. So, it is going to be a value chain. The benefits are going to be so enormous.”
The Senate also commended President Buhari for giving his presidential assent to the PIB. Senator representing Osun Central and chairman, Senate Committee on Media and Public Affairs, Basiru Ajibola, described the assent by President Buhari as “a major victory that has the potential of bailing Nigeria out of its economic predicament and an act that will enable the country make the most of economic gains of the oil industry for the benefit of Nigerians.”
Senator Ajibola further attributed the success of the assent to the Bill, which has now become an Act, to the warm relationship between the Parliament and the Presidency.
Speaker of the House of Representatives, Femi Gbajabiamila, had in a statement issued by his Special Adviser on Media, Mr Lanre Lasisi, said the bill has become an Act of the National Assembly and expressed optimism that Nigeria’s oil and gas industry will now receive a breath of fresh air. Gbajabiamila said when massive investments come in as a result of the Act, a lot of Nigerians will gain employment.