NNPC’s OpEx, salaries hit N2.9tr in 2023, up by 70 per cent

The Nigerian National Petroleum Company Limited (NNPC) may be dealing with a serious cost pressures as the company’s general and administrative expenses amounted to N2.991 trillion in 2023, soaring by over 70 per cent from the N1.704 trillion recorded in 2022.

The company, in its 2023 audit financial statement released Monday showed that the total selling and distribution expenses of N132.010 billion, which represents a significant increase from the N22.881 billion reported in 2022 was also recorded given rise in the costs associated with getting products to market.

While the group incurred bank charges of N8.747 million in 2023 against N627,000 in 2022, foreign exchange loss by the company amounted to N899.399 billion in 2023 as depreciation of property, plant, and equipment stood at N101.034 billion in 2023, almost doubling from N59.262 billion in 2022.

This depreciation reflects the wear and tear on assets, an essential non-cash expense that affects profitability. Salary and other benefits to NNPC employees in 2023 rise sharply N583.797 billion in 2023 from N266.923 billion in 2022, a development that shows possible increase salary, pensions or other employee-related costs.

Similarly, NNPC’s legal and professional fees rose to N182.754 billion in 2023, compared to N44.409 billion in 2022, indicating an increased legal activities, possibly related to regulatory compliance, litigation, or consultancy services.

In the year, NNPC spent N161 billion in safeguarding the company’s energy assets while paying N9 billion in rent and over 600 million on printing.In 2023, NNPC’s repairs and maintenance stood at N166.494 billion from N124.277 billion in 2022, reflecting higher maintenance costs for the company’s assets.

Apart from its spending on energy security, the company spent N170.703 billion in 2023 on security against the N267.890 billion in 2022. Apart from its staff benefits, NNPC spent N48 billion on staff training and recruitment while N1.324 billion was spent in 2023 on technical and consultancy.

In the year, NNPC’s miscellaneous expenses, totaled N402.858 billion in 2023, against the N644.584 billion in 2022 while travelling expenses stood at N44 billion and telephoning was N7 billion.

On the distribution expenses, throughput charge, a fee paid to Private Depot Owners (PDOs) for handling petroleum products on behalf of NNPC at terminals was N38.616 billion in 2023, marking a substantial rise from the N5.568 billion reported in 2022.

The cost associated with acquiring services for the transportation of petroleum products to various depots in and outside jumped dramatically to N93.994 billion in 2023, compared to N2.050 billion in 2022, which accounts for the bulk of the increase in selling and distribution expenses.

In 2023, the Group and Company during the period donated a total sum of N19 billion and N11 billion against the N1.3 billion and Company N314 million in 2022.

NNPC had announced in September 2021 its proposal to acquire a 20 per cent stake in Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE).

The transaction, valued at $2.76 billion, was strategically financed through a forward sale agreement of $1.036 billion, facilitated by Lekki Refinery Funding Limited. Of this amount, $1 billion was directly paid to DPRP FZE as part of the investment.

Initially, the investment was held by NNPC Greenfield Limited, a special purpose vehicle fully owned by NNPC, in trust for NNPC Limited, the report noted that following the restructuring of NNPC Limited in the post-Petroleum Industry Act (PIA) era, the management of this investment was transferred to the NNPC Downstream Investment Service (NDIS).

NNPC Limited and DPRP FZE agreed that the balance of $1.76 billion, which was initially planned to be settled through a proposed crude discount of $2.5 per barrel off the official selling price, will now be paid in cash.

The inability to raise the cash stalled the development and kept the interest at 7.25 per cent equity interest in DPRP FZE.