Is NNPC broke?

The Nigerian National Petroleum Corporation, NNPC, said, weekend, that despite losing N230billion annually from marketing and refining operations, the Corporation was not broke. It also disclosed that it owes over $6billion in cash call arrears.

NNPC insisted that there was no way the Corporation can be broke, given its assets base and equity holding in the petroleum industry.

The Group Managing Director, NNPC, Dr. Emmanuel Ibe Kachikwu, who reassured of the Corporation’s solvency in Lagos, during a question and answer session with journalists, said what was wrong with the establishment was cash flow management.

Specifically, while admitting that the Corporation owes about $6billion in Joint Venture, JV cash call obligations, he also disclosed that NNPC was losing annually over N200 billion through the Pipeline and Products Marketing Company, PPMC and additional N10billion from each of the nation’s refineries. This brings the yearly losses to more than N230billion.

He said: “No, I don’t think we are broke. We can never be broke because our assets base is so strong. You know that about 60 per cent of 1.2million barrels of oil a day, plus another almost 100 per cent ownership of NPDC assets; oil on ground not even allocated and gas resources, we really could never be broke.

It is a cash flow issue as opposed to asset resource. We are not broke, we’re going to manage our cash flow better, we are going to see what falls in to enable us to inject money into the economy and do the things that we need to do. We are going to be more efficient.”

Explaining the pile up of the Joint Venture, JV cash call arrears of about $6billion, Kachikwu said: “The $6billion arose from very many factors; one is for PSCs (Production Sharing Contracts). There you don’t have these issues, but for the JVs, you have them because every year the Assembly comes out and says, you need $4billion and they give you $1.5billion. So the gaps have been accumulating over time and that is the arrears, and when those gaps came, we did not get aggressive with trying to look for alternative funding to cover those gaps.

The NNPC boss also said managing the system better is what the ongoing reform of the Corporation is all about. He claims it is already yielding positive results with huge savings of about $150million monthly through contract cancellations.

 

Contract cancellations yield $150m

Kachikwu said that the contract cancellations was not about calling a dog a bad name in order to kill it, but ones that fell short of procedures and did not have the best yield.

According to him, “If a contract does not give a good financial yield for the country and for the company, I cancel it. It is not to say that the individual who is operating that contract is bad. What it simply calls for is you open it up and ask others to give you an alternative. If an individual comes up and he is the best alternative, so be it.

“So the first bullish effort that we did was to cancel all the former contracts we felt had challenges or issues. That is not to say that the contracting parties were bad. Again, I pay less emphasis on individuals and institutions. I pay more attention on processes and outcomes. It is not for me to say a company is bad or good. I am not a judge.

“If you look at the contracts we have cancelled, we have saved an average of $150 million a month

Reiterating the essence of systems transparency, Kachikwu noted that NNPC, had hitherto been perceived as being very opaque, and as such needed to do away with such negative perceptions and open up its operations to public scrutiny.

In his opinion, “If NNPC must get back its credibility; it must be on the altar of transparency,” adding, “it is an entitlement of the country. It is not a privilege for people to know how their oil money is obtained, how contracts are done, how the income is spent. NNPC, not being a private company, we must be very open.”

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