President Bola Ahmed Tinubu on Friday announced that his administration plans to list the National Petroleum Company Limited, NNPCL, on the Nigerian Exchange Limited, NGX. The move is not unconnected to the ongoing reforms and restructuring of the state-owned petroleum company. The president announced the plan when the NGX management visited the Presidential Villa on Thursday.
What Tinubu said
According to him, the objective of his administration is to make NNPCL efficient like Saudi Arabia’s Aramco. Tinubu assured that his administration’s reforms and the implementation of the Petroleum Industry Act would strengthen the NNPCL and the country’s oil and gas sector.
“We will do NNPCL reforms to the extent that one day the totality of it, not just arms and legs, the totality of it, will be listed on NGX,” he said.
What does it mean for NNPCL and Nigerians
The listing of NNPCL has been touted as a masterstroke that will sanitise the company and bring a much-needed and long overdue overhaul and cleanup to it. What the official listing of NNPCL means is that the Nigerian government will no longer have outsized influence and overwhelming control over the day-to-day operations of the state-owned oil company, as NNPCL will now sell equity shares to private individuals and major investors, both within and outside Nigeria. The listing means Nigerians can now effectively own a piece of NNPCL by buying a share, as the move will democratise wealth for small-time and retail investors.
The listing is expected to open up NNPC to transparency and accountability through compulsory disclosure of operational details, fiscal structure and the entire inner workings of the company, ditching the opaqueness and ambiguity that the company is known for. It will also eliminate the perennial corruption, crippling political interference and fiscal loopholes that have beset the company for years, as the company will now be forced to run as a corporate entity with full oversight of shareholders and scrutiny of the public. It will also improve and deepen accountability on the part of the government
Concerns over NNPC stakes selloff
Some Nigerians have expressed their reservations and misgivings over the plan. Some are concerned that listing the NNPC on the Nigerian stock exchange may not be the magic wand for the long-standing and deep-seated problems that have plagued the nation’s state-owned oil enterprise for years. Chief among the worries of those who are opposing the move is that listing of the state-owned oil company alongside its portfolios and critical energy infrastructure under it—which surrenders the company to private investors— is that such a move negates the very objective and operational mandate of the NNPC
The board of directors that will likely oversee the operations of the NNPC once listed will, by as dictated corporate law, owe a strict fiduciary duty to act solely in the financial best interests of all shareholders and not just the majority owner (the government) and this will undermine and erode the core mission of the NNPC which public welfare, national energy security, or affordable living for Nigerians. Instead, it must legally and statutorily operate to maximise corporate profits, increase dividend yields, and protect the financial interests of rapacious local and foreign investors.
Another major concern of those who oppose selling stakes in NNPC to private investors is that any future attempt to subsidise fuel, especially premium motor spirit popularly known as petrol, will be practically impossible. Furthermore, they reckon that listing of NNPC will also permanently slam shut the backdoor channels and loopholes that NNPC leverage to finance major and critical national projects like highways, power projects, healthcare centres, and public universities.
It will be recalled that the NNPC has previously entered into forward sale agreements (Resource-Backed Loans) with international financial institutions and other lenders whenever the government is cash-strapped and needs quick off-budget funding for key national infrastructure or urgent fulfilment of debt obligations. The state-owned oil company pledges future crude oil deliveries for immediate upfront cash. This arrangement will no longer be possible once NNPC goes public
What is the way forward
While listing of state-owned oil companies is not a novel arrangement, as countries like Saudi Arabia and Brazil have listed their NNPC equivalent on both local and foreign markets, the reality, however, is different for NNPC and Nigeria. For Nigeria, fundamental issues have not been resolved. The country still finds it exceedingly difficult to protect and secure its key energy infrastructure, and government-owned local refineries have become nothing more than a conduit pipe for corruption and siphoning of public funds. These basic but important problems are usually not found in countries that have publicly listed their state-owned oil companies. It is also worth mentioning that countries that went the route of publicly trading their state-owned oil companies only sold a fraction of the company stake and equity to private investors, while the state keeps and controls a massive, overwhelming and consequential stake of the company. For instance, less than 2% of Aramco equity is publicly traded.
It is still early days, and the government has not released any document detailing the planned listing of NNPC, particularly information on the percentage of the company’s ownership the government plans to publicly trade and cede to shareholders. Until then, debates on whether the move is prudent and in the public interest will continue
