As Nigerians continue to grapple with hardship, ocassioned by high cost of living, low purchasing power, rising insecurity, among others, some analysts have called out the nation’s oil company, Nigerian National Petroleum Company Limited for alleged lack of transparency in operations, which they claim has led to confusion and wastages in the oil sector.
From alleged diversion of large volumes of crude oil to foreign creditors, which has made it difficult to sustain the naira-for-crude deal,
creating a supply crunch for domestic refiners, to lack of full operations by modular refineries, all have been linked to inefficiency and opaqness in the operations of the company.
Several modular refiners are still awaiting their first crude oil supplies despite the NNPCL’s pledge to support them as part of the federal government’s efforts to boost local refining capacity and reduce dependence on imported petroleum products.
The modular refineries, which are smaller-scale, flexible refining units, have been touted as a crucial step towards achieving energy self-sufficiency.
However, their operations remain hampered by the lack of readily available crude, on the alter of forward sales abroad.
The resort, by local refineries to purchase of crude from abroad as third-party suppliers, has continued to put presure on the naira as well as depleting the nation’s foreign reserves.
Victor Ogiemwonyi, Lagos based analyst and retired Investment Banker noted that the commitment of NNPCL to forward sales has resulted in highest importstion of petroleum products, particularly, the last quarter of 2024, despite the fact that local production now exceeds demand.
In a published article, “What Is Holding Up NNPC from Becoming a Publicly Listed Company?”, Ogiemwonyi said, “Unsurprisingly, the naira is once again under pressure. These petroleum imports must be paid for using Nigeria’s scarce dollar reserves, further exacerbating currency devaluation. The insistence on selling foreign exchange (FX) to petroleum importers, which accounts for over 40% of FX demand, limits the availability of FX for importing essential machinery and raw materials for the industrial sector. This flawed policy continues to frustrate those who recognize its negative impact on the economy.”
Criticising the NNPC’s Lack of Transparency, he further wrote, “The opacity surrounding NNPC’s operations raises concerns about accountability. The company frequently makes corporate decisions with impunity, reinforcing the suspicion that the full story is not known to the public
A fundamental policy shift that could make NNPC more accountable and beneficial to Nigeria would be to publicly list its shares. Doing so would subject the company to market rules and scrutiny. Currently, the lack of transparency is reminiscent of a conversation I once had with an executive from an International Oil Company (IOC) in Nigeria. He explained that no one truly wants NNPC audited because it serves as a “piggy bank” for the government. If the government needs a new helicopter, for example, it simply instructs NNPC to buy one—no need for legislative approval or appropriation processes.
If NNPC were publicly listed, such opaque transactions would cease, making its financial dealings visible to all stakeholders. This is precisely why NNPC leadership is reluctant to embrace public listing. Instead, they continue to engage in new ventures and sign long-term contracts with little public accountability.
For a corporation supposedly preparing for public listing, one would expect financial and legal advisors to have been appointed by now. However, there is little indication that meaningful work is being done toward this goal. If it takes this long to prepare for a listing, it further underscores the deep-rooted issues within NNPC. The best course of action would be to list the company as it is and let investors determine its value.”
Bismarck Rewane, Chief Executive Officer, Financial Derivatives Company, in the FDC Economic Update, for March 20 said, “Dangote Refinery has suspended the sale of petroleum products in naira following the expiration of its contract with NNPCL in March. The $20bn refinery may now source crude in dollars and sell products in dollars, potentially driving up prices of petrol and diesel, weakening the naira, and fueling inflation.”
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Friday Ameh, Lagos based energy analyst observed that the Nigerian downstream sector has recorded yet another shift following Dangote Refinery’s latest decision to temporarily halt the supply of refined petroleum products in the country’s local currency to marketers.
The development, he further said, has prompted a sharp increase in depot prices, with petrol now selling for N875 per litre, according to Petroleum Price, up from less than N850 per litre before the announcement.
According to him, the development shows that Nigerians, who have experienced three petrol price reductions by Dangote Refinery since January, will be bracing for higher prices at the pump.
According to another analyst who pleaded for anonymity, the indulgence of NNPCL in almost all activities in the sector, from being sole importer, marketer, regulator, has emboldened it for corruption. He added that its fragmentation into upstream and downstream, for instance, may have rather increased the running cost, rather than improving regulatory efficiency.
The implication, he added is that the value of oil as a wasting asset will continue to depreciate, compounding the revenue challenges of Nigeria, as the major foreign exchange earner.
More worrisome, he said, is the sure, but slow global transition to renewable energy, that could drastically reduce the value and relevance of NNPCL.
According to him, government should muster the political will to diversify the economy, which has continued to feature on poliitcal and economic agenda of successive administration.
Also, the company, should be made to be more relevant to the economy by being listed alongside its subsidiaries on the nation’s exchange .
The Technical Sub-Committee on the Naira-for-Crude Policy which was supposed to meet on Monday to deliberate on the matter should be given express power and authority to act decisively in the interest of the country
It was gathered that the committee, which, sources say, may meet before sallah, recently mandated the Nigerian Upstream Petroleum Regulatory Commission to come up with options that would be reviewed by the panel, with the aim of returning the naira-for-crude deal.