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Research Reveals NNPC’s Poor Contributions To Economic Value Chain

…as calls for PIGB assent mounts

 

Despite being in charge of the Nigeria’s vast oil and gas resources and controlling majority stake in multibillion dollars assets on behalf of the government and people, the Nigerian National Petroleum Corporation (NNPC) contributes insignificantly to the nation’s economic value chain, a research has found.

 

The research report which was presented Thursday at the University of Ibadan, assessed the NNPC’s contribution to the Nigerian economy. It was conducted by the Centre for Petroleum, Energy Economics and law (CPEEL) with funding from the Nigeria Natural Resource Charter (NNRC).

 

The report revealed that the NNPC ranked least when benchmarked with other National Oil Companies (NOCs) such as Statoil, Petronas and Petrobras in terms of sector governance, commercialization, operational efficiency, value creation to economy and local content development.

For instance, using NNPC’s operations in 2016 as case study, the research observed that the corporation contributed 4.66percent to the nations GDP, while its contribution to other sectors GDP in the same year was a mere 0.13percent.

 

In his presentation, Dr. Sam Orekoya, who was also a member of the research team, explained that the Corporation contributed 6.51percent to the Value Added Tax (VAT) created in the economy in 2016, but contributed 0.11percent to value added in other sectors.

 

According to the report, a review of the corporation’s refineries contribution to the economy “showed that the multiplier impact of the firm/sector’s production activity is small in spite of the huge investment and frequent maintenance expenses incurred on the refineries and pipelines.”

 

A further breakdown showed that contributions of the refineries and pipelines to Gross Net Domestic Output in the economy in 2016 was -1.69percent and -0.04percent to other sectors respectively. In a similarly poor measure, it contributed 0.05percent to the 51,478,405 employments in the economy in year 2016.

 

Giving more insights into the outcome of the research, Lead Researcher, Dr. Lateef Akinpelu, stated that poor sector governance ranked highest among the factors limiting the NNPC from optimal value addition to the economy.

 

He explained that while a significant value addition is realised from the upstream sector, there is weak linkage with the rest of the economy and contribution to GDP is low. “Value addition from the mid and downstream sectors remain elusive due to low refining capacity and poor sector governance,” Dr. Akinpelu said.

 

This is as the research established that aggregate refining capacity utilization was often less than 20percent compared with global refining capacity utilization of about 80percent.

 

On whether there was a single model the NNPC could adopt to improve its operations vis-a-vis value addition to the economy, Dr. Akinpelu suggested that while the NLNG model can be replicated in the refining sector, best practice models can also be adopted from other successful NOC’s such as Statoil and Petrobras.

 

The report however, recommended that a change in the business model or ownership structure of the NNPC will improve its corporate governance and value creation capacity.

 

Speaking with e360 in Ibadan on the objective of the research shortly after presentation of the report, Tengi George-Ikoli, Program Coordinator of NNRC, said the Charter, being a policy initiative that focuses on improving governance in the petroleum sector, realised from its previous assessments that the NNNPC had consistently poor performance over some years.

 

“So we wanted to dig a bit deeper to find out why the NNPC has this disparaging reports and to find out generally how it contributes to the Nigerian economy,” George-Ikoli told e360.

 

She said the research has found a lot of gaps in the sectors governance, noting however, that the Petroleum Industry Governance Bill (PIGB) if assented to quickly by the president has potentials to improve the NNPC’s contribution to the Nigerian economy.

 

In line with the repots recommendation that a change in the business model of the NNPC will improve its corporate governance and value creation capacity, participants unanimously agreed that a quick assent to the PIGB as well as passage of other segments of the PIB was critical.

 

They urged President Muhammadu Buhari to expedite action and assent to the PIGB which has already been passed by the National Assembly and transmitted to him, in the interest of the Nigerian economy.

 

Research students, academic doctors, professors, journalists and other stakeholders were in attendance during the presentation of the research report.

 

 

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