The struggle facing the Nigerian National Petroleum Company Limited (NNPCL) amidst low oil production, subsidies, financial and structural crises has created concerns, says the Institute for Oil, Gas, Energy, Environment and Sustainable Development (OGEES Institute).
The institute located at the Afe Babalola University in Ado-Ekiti, Ekiti State, noted that the state oil company, unlike other national companies across the world, is performing below par.
Director of the institute and Deputy Vice-Chancellor (Academic), Prof. Damilola Olawuyi, voiced concerns about the company’s slow progress in meeting its ambitious goals, despite several strategic plans and promises made at the onset of its commercialisation process.
In a detailed analysis, Olawuyi told The Guardian that the disconnect between the high expectations set for NNPCL and the reality on the ground, where little tangible progress has been observed, is worrisome.
The position comes amidst worsening challenges in the upstream and midstream segments of the sector as investment plummets and the inability to rehabilitate local refineries pushes subsidy debts to over N4 trillion.
Olawuyi noted that the last two years for NNPC have seen more anticipation and planning, but less in terms of actual, substantial organisational and economic performance
“Several plans have been announced, including the proposed public listing of the company’s shares, the regular public release of audited financial reports, greater accountability, and transparency. However, these plans have yet to materialise in a manner that reflects the scale of NNPC Ltd’s ambitions,” he said.
According to him, NNPCL’s journey towards commercialisation has been marked by the announcement of several initiatives aimed at transforming the company into a competitive player in the global oil and gas industry. The initiatives include revamping aging infrastructure, especially refineries; enhancing technology efficiency and full-scale digitalisation of operations, advancing low-carbon energy transitions and penetrating international markets to compete with global oil giants such as Saudi Aramco, Qatar Energy and the UAE’s ADNOC have been dismal.
Olawuyi said: “While some of these plans are beginning to take shape, the overall pace has been far from encouraging,” adding: “The challenges posed by the COVID-19 pandemic, ongoing global divestments from the oil and gas sector, the impact of the Ukraine war on oil markets, and Nigeria’s transition to a new government in 2023, have certainly played a role in this.”
He, however, noted that these factors should not obscure the need for a more aggressive and results-oriented approach from NNPC. One of the key areas of concern to him is the company’s financial transparency.
In addition to concerns about transparency, Prof. Olawuyi pointed to logistical challenges that continue to plague NNPC operations, stressing that the logistical issues surrounding fuel distribution and supply across the country have yet to be fully resolved.
He decried the state of the company’s refineries, which have been comatose, adding that there is a pressing need for significant investments in infrastructure to bring these facilities back online.
To address these challenges, Olawuyi emphasised the need for NNPC to function fully as a commercialised and efficient private sector entity. “Perception is a key driver of investment. If NNPC Ltd is perceived as opaque, inefficient, and bogged down by logistical and operational challenges, it will struggle to attract the kind of investment needed to realise its full potential,” he warned.
Olawuyi urged the company’s management to take clear and urgent steps to improve logistical and organisational efficiency, eliminate bottlenecks in supply chains, and streamline internal processes through modern technologies and digitalisation. He also called for the restructuring of non-performing departments and subsidiaries to reduce overhead costs and boost profitability.
“NNPC Ltd. has a unique comparative advantage as an African oil company operating in Africa’s largest market. To capitalise on this, it must demonstrate a commitment to efficiency, transparency and value creation. This includes investing in multilateral partnerships, engaging in global benchmarking alliances and ensuring timely and accurate corporate disclosures that reflect both its financial and sustainability performance,” he said.
Olawuyi stressed the importance of moving from rhetoric to action, stating that NNPC must shift from wishful aspirations to tangible outcomes if it is to compete with other commercialised national oil companies and deliver on its mandate of national energy security and economic growth.
