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Research Show How Poor Governance Impacts NNPC’s Contributions To Economy

…Refineries with 2,000 staff operating at 17% capacity

 

A research on the assessment of the contributions of the Nigerian National Petroleum Corporation (NNPC) to the nation’s economy has indicated that although the corporation has huge potentials to add value to the Nigerian economy, it has failed to do so due largely to challenges with governance and institutional frameworks.

The research which was presented at a stakeholder’s workshop titled Assessing Nigeria’s Petroleum sector Wealth: Examining NNPC Groups Contributions to the Nigerian Economy, was funded by the Nigeria Natural Resource Chatter (NNRC) and conducted by the Centre for Petroleum Energy Economics and Law, University of Ibadan.

Presenting highlights of the findings Thursday in Lagos, the Research Lead, Dr. Lateef Akinpelu, said, “the major highlights indicates that the NNPC has a lot of potential to contribute to the economy, but right now that potential is unfulfilled because of many challenges. This is because the sector governance and institutional frameworks are not there, which are needed to deliver the potential.”

He added that there is also the issue poor data and process systems, saying, “we need good planning to be able to realize the gains in the petroleum value chain and do good planning. In other climes people regularly update their data so that they can improve insights into their processes to enable them improve because the industry is dynamic.”

Dr. Akinpelu noted that while there have been several attempts to make the NNPC adopt the kind of business excellence seen in other National Oil Companies (NOCs) like the Statoil or even benchmark against the International Oil Companies (IOCs), it has not been achieved due largely to the corporations ownership structure. “When you look at the NNPC and the IOCs what is different is just the ownership. The NNPC is a business entity created to add value, but we don’t see much of that value because of its ownership,” Akinpelu said.

The research found that the nation’s refineries with about 2,000 staff were operating at a mere 17percent average as at the time of the report, forcing the country to depend on product importation. The development, according to the report has led to the total collapse of all linkage economic activities that thrive on the back of in-country refining.

However, Akinpelu observed that the recently passed Petroleum Industry Governance Bill (PIGB) is major step forward towards achieving desired results from the sector, noting that because investments in the oil and gas sector are long term, people are interested in knowing what the rules are.

Also speaking at the event, Chairman of the Expert Advisory Panel of the NNRC, Mr. Odein Ajumogobia, said the NNPC has rather become a mere revenue collecting agent for the federal government instead of a value adding corporation.

“The refineries are not working, petrol chemical plants are not working, Eleme petrochemicals have been sold to Indorama which is doing a great job now and paying dividends. In terms of oil production, the NPDC which is the exploration and production arm of the NNPC is not producing a significant amount so what role is this huge corporation that employs 80,000 people really playing in adding value to the economy other than collecting money for the government?” Ajumogobia queried.

Ajumogobia

Ajumogobia, a former Minister of State for Petroleum Resources, pointed out that Nigeria had in 1974 attained production of 2.4millionn barrels per day (bpd) from onshore and shallow fields exclusively. In contrast, he said, “Of the just over 2million bpd said to be produced today, close to 1million bpd is from deep offshore fields developed more than 20 years later, highlighting the massive decline in JV production over the years.”

Warning that Nigeria could cease to be a net exporter of crude oil in 10 years if adequate reforms are not urgently implemented, the former minister said, “by way of contrast, Angola doubled its oil production within the last 15 years from 750,000 bpd in 2004 to a peak of 2million bpd in 2014”… whereas Nigeria has in the last 20 years aspired to grow her oil reserves to 40 million barrels and daily output to four million barrels without success.

“But beyond increased reserves and production volumes, value addition in refining and other processing and distillation ventures and ancillary activities that would lead to real sector growth has not been successful,” Ajumogobia added.

Noting that the controversial subsidy on petrol was unsustainable, he said, “We are supposed to produce our refined products here but we export our crude and import products. We like the higher oil price because it gives us higher revenue, but the higher oil price also leads to higher prices of derivatives like petrol, so as long as we do so (import refined products) the idea that subsidy has been removed is simply not true.

“Whether it’s paid directly through the Petroleum Products Pricing and Regulatory Agency (PPPRA), or taken by NNPC as part of its cost it is still a subsidy because the money belongs to the government,” the former minister stated.

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