NNPC: 2018 Audited Financial Statement, New Paradigm For National Corporation

NNPC: 2018 Audited Financial Statement, New Paradigm For National Corporation

The recent publication of the audited financial account of Nigerian National Petroleum Corporation (NNPC), the first time, 45 years after it commenced operation is a tonic that will change the prospect of the national oil company for the benefit of all, writes FESTUS OKOROMADU.

In a nation where leaders but in the political, social and economic circles are perceived to be people who do not keep their promise any exception to such altitude should be commended and celebrated. This is why the management of the Nigerian National Petroleum Corporation (NNPC) under Mallam Mele Kyari should be applauded for doing the needful.

Mallam Kyari, who assumed office as the Group Managing Director of the NNPC on 8 July, 2019, in his maiden speech at the handing over ceremony promised to bring transparency to the running the corporation. He vowed to be accountable to the 200million Nigerians whom, he believes, are the true stakeholders of the company.

Kyari, stated unequivocally that the corporation’s business dealings and governance, under his watch, would be run openly and in strict departure from the optic nature its financial dealings has hitherto been known for by many Nigerians.

Transparency, he explained at the ceremony marking his assumption of office, would be his watchword. Available reports shows that he matched his words with action by rolling out a programme known as TAPE – Transparency, Accountability and Performance Excellence, which has become the operating guideline and a way of doing business in the corporation. Thus, the publication of the corporation’s 2018 audited financial statements (AFS) Thursday 11th June, 2020 can best be described as a promised fulfilled.

There is no doubt that this event which remains indelible in the annals of the corporation would bring about a new lease in the way and manner it will be run going forward. For instance, since the accounts of the 20 subsidiaries and business divisions that makes up the national company where released it has been trailed by both criticism and commendation.

While the criticism gives the management an insight to what they have not done well, the commendation encourages them to perform better.

This act of openness and accountability to stakeholders is one of the distinguished factor that makes companies quoted on stock exchange globally perform better.

According to the NNPC GMD, the publication of the comprehensive audited financial statements is in compliance with President Muhammadu Buhari’s commitment to accountability and transparency.

Therefore, the no holds barred publication of the corporation’s 2018 AFS is, however, not fortuitous.

The full disclosure of the corporation’s books involved those of 19 Strategic Business Units (SBUs) and a Corporate Services Unit (CSUs), even as the NNPC affirmed that its 2019 Audited Financial Statement of the corporation was already being prepared and expected to be ready in a couple of months.

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For a company most maligned for opacity in recent past, the publication of NNPC’s books is a big deal. Any wonder that extractive industries watchdogs across the world have touted the feat as a glorious example worthy of emulation.

Extractive Industries Transparency International’s (EITI) Executive Director, Mr. Mark Robinson, declared, no sooner than the NNPC AFS was made public, that the development came at a record time, commending the National Oil Company as setting a new standard of reporting.

Robinson’s praise of NNPC was posted on the global body’s official tweeter handle.

Similarly, the Nigeria Extractive Industries Transparency Initiative (NEITI) has described as laudable, the decision of the Nigeria National Petroleum Corporation (NNPC) to make public its audited accounts for the first time in its history with the publication of its 2018 Audited Financial Statement (AFS) on its website.

NEITI acknowledges that the development fulfiled a pledge made by the GMD of NNPC, Mr. Mele Kyari, to the management of NEITI at a meeting on 6th August 2019, a pledge which Mr. Kyari reiterated on 25th November 2019 during the official visit to Nigeria of Mr. Mark Robinson, the Executive Director of the global EITI.

It stated that during the August 2019 advocacy meeting, the NEITI management had urged the then new GMD of NNPC to consider demonstrating his espoused commitment to transparency by making public the corporation’s audited accounts. Mr. Kyari acceded to the request on the spot.

NEITI Executive Secretary, Mr. Waziri Adio said the organisation welcomed the eventual fulfilment of the pledge and obligation, saying given NNPC’s antecedents and its prominent role in the sector and in the country, the publication of its audited accounts was positive, signaling more openness for the oil and gas sector and for Nigeria.”

He stated that the development, when combined with the monthly reports that NNPC started publishing in 2016, the publication of the AFS marks a sea-change for NNPC was considered opaque in the past, admonishing that NNPC make full disclosure of its books a routine practice and to mainstream transparency into all facets of its operations.”

NEITI called on the corporaton to go further by publishing its previous audited accounts and in open data formats so that the reports can be more accessible to citizens who are the shareholders of the corporation, saying NNPC should also strengthen and sustain its commitment to data mainstreaming and systemic disclosure.

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NEITI stated that it was working closely with the NNPC in this direction through a joint committee on remediation and mainstreaming. The committee, set up by the two organisations, was tasked with the responsibilities of examining the status of legacy.

On his part, Senator Bassey Akpan, Chairman, Senate Committee, Upstream, said the recently published Audited Financial Statements of the NNPC underscored the readiness of the new Management of the National Oil Company to pursue transparency, good governance and accountability in the Petroleum Industry.

The release of the AFS was in compliance with the directive of President Muhammadu Buhari and his Administration’s commitment to accountability and transparency, heralding a new regime of full disclosure of government agencies’ transactions. It was also made in accordance with International Financial Reporting Standards, apart from being a requirement for the Companies and Allied Matters Act (CAMA).

In all, 19 entities of the corporation, registered under the Companies and Allied Matters Act (CAMA) as amended and the National Petroleum Investment Management Services (NAPIMS), had their books published on the NNPC Website.

The 2018 NNPC’s AFS posted positives in many of the National Oil Company’s Upstream going concerns. A perusal of the AFS for the year ended December 31, 2018 of the National Engineering and Technical Company (NETCO), an Upstream subsidiary of the corporation, indicated a profit after tax of over N4.5billion, a remarkable improvement from the previous year record of over N2.4billion.

The AFS of the Nigerian Petroleum Development Company (NPDC) indicated a profit after tax of over N179.1billion which comes as significant improvement from the 2017 profit of over N157.4billion.

During the period, NPDC posted a revenue of over N1.3trillion compared to the 2017 revenue of over N882.3billion. The AFS indicated that the NNPC’s flagship subsidiary has a total asset of over N5.3trillion within the period, compared to the N4.007trillion asset recorded in 2017.

On its part, the Nigeria Gas Company (NGC) recorded a profit after tax of over N13.2billion with a comprehensive annual income of about N19.9billion.

The AFS also valued the NGC total assets in 2018 at over N251.7billion compared to N196billion in 2017.

In the Downstream Sector, the Petroleum Products Marketing Company (PPMC), for the first time, recorded gross profit of N24.3billion in the year under review, while NNPC Retail Limited posted profit after tax of over N2.2billion compared to the N1.8billion recorded in the preceding year.

The statement also indicated that National Petroleum Investment Management Services (NAPIMS) posted revenue of N5.04trillion in 2018 and profit of N1.01trillion, with total assets under the portfolio of the services unit valued at N18.6 trillion. NAPIMS, among others, manages the Joint Ventures contracts in the Upstream Sector on behalf of the government.

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Integrated Data Services Limited (IDSL), an NNPC Subsidiary in charge of acquisition and interpretation of seismic data, posted a total comprehensive income of about N3.2billion with profit of about N154million within the period.

It is undeniable that the 2018 NNPC’s AFS revealed some challenges in the midstream subsidiaries of the corporation, most significantly, in the refineries located in Port Harcourt, Warri and Kaduna, where losses were recorded, unsurprisingly because of their long downtime. It is, nonetheless, reassuring that the corporation has commenced the process of a comprehensive diagnostic assessment of the refineries that would culminate into their thorough rehabilitation, starting with Port Harcourt and Warri Refineries. In addition, proposals to change the refineries’ business models to that similar to Nigeria Liquefied Natural Gas Limited’s (NLNG), which has been a success story over the years is also afoot.

It should also be noted that there existed a seemingly wide gap between NAPIMS revenue and profit for the year as contained in the NNPC’s AFS. Noteworthy, again, is the fact that NNPC and its partners are already considering modalities to cap crude oil production cost per barrel at $10 by 2021 in order to ensure that Nigeria benefits more from the nation’s hydrocarbon resources. This is a position which the NNPC Group Managing Director, Mallam Kyari, has made clear at every avenue.

NNPC’s entities covered in the 2018 AFS are: NAPIMS, IDSL, NPDC, NETCO, Port Harcourt Refining Company (PHRC), Warri Refining and Petrochemicals Limited (WRPC), Kaduna Refining and Petrochemicals Company (KRPC), Duke Oil Services (UK) Limited, Duke Oil Incorporated and Duke Global Energy Investment Limited, the Wheel Insurance, Petroleum Products Marketing Company (PPMC), Nigerian Pipelines and Storage Company (NPSC), NNPC Retail Limited and NIDAS UK Agency.

Others include; NIDAS Shipping Services, NIDAS Marine FS, Nigerian Gas Marketing Company (NGMC), Nigerian Gas Company (NGC), and N-Gas.

The NNPC 2018 comprehensive AFS may not be a perfected report. There are not many perfect ones the world over! Its being made available to the public, nonetheless, projects a significant progress in institutionalising transparency and accountability in NNPC, a bold move which, in many respects, is a worthy example for others to emulate.

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