August 26, (THEWILL) – Operating and related expenses of the Nigerian National Petroleum Company Limited, NNPCL, witnessed a significant increase in 2023, while it superintended over four resource-gulping idle refineries and engaged in massive importation of refined petroleum products.
The NNPCL’s audited financial statements published recently revealed that the national oil company posted a 75.5 percent jump in general and administrative expenses from N1.7 trillion in 2022 to N2.9 trillion in 2023.
Its cost of sales witnessed a greater surge – hitting N16.9 trillion in 2023 from N6.7 trillion in the previous year – translating to a 152.8 percent increase.
An analysis of the financial statements showed that aside from the foreign exchange loss of N899.3 billion in 2023 against a zero figure in the previous year, the company’s major expenses under this head reside in employee benefit expenses which jumped by 118.7 percent to N583.7 billion from N266.9 billion in the previous year.
The company also recorded a significant increase in staff training/recruitment cost which rose by 95.5 percent to 44.2 billion from N25 billion in 2022.
During the review period, directors’ fees and expenses increased by 214.6 percent to N2.5 billion from N824 million the corporate policy-making team garnered in the previous year. However, entertainment expenses recorded a moderate increase of one percent from N7.3 billion in 2022 to N7,4 billion in the review period.
Under the cost of sales, the major expenditure items included royalties to Federal Government of Nigeria which rose to N1. 8 trillion as against N618 million in the previous year – representing a 205.5 percent increase, while depreciation and depletion of oil and gas properties increased to N1.2 trillion from N145 million in the previous year, a jump of 759.3 percent.
The company paid N10.3 trillion for petroleum products in 2023 compared to N4.7 trillion in 2022, an increase of 119 percent.
The financial statements have attracted mixed reactions from stakeholders and industry experts. An oil and gas expert Henry Adigun, faulted the recently released 2023 audited financial statements of the national oil company on grounds of inadequate transparency.
Speaking on the Channels Television programme, Adigun said the audited financials should be broken down to reflect the profits of Nigeria Liquefied Natural Gas Limited (NLNG), the NNPC Retail, NNPC Group and other corporations for Nigerians to have a true picture.
“What we are seeing right now is what they want us to see,” he noted.
Recently, NNPC Limited released its 2023 audited financial statements, declaring a net profit of N3.297 trillion at the close of the financial year which ended in December 2023, an increase of over N700 billion (or 28 percent) when compared to the 2022 profit of N2.548 trillion.
The company also said it is not paying subsidy on petrol rather differential price shortfall between the cost of importation and the retail price.
However, Adigun said the imported cost of petrol is one dollar and some cents and the NNPCL has been bearing the differential cost. He noted that it is not true that subsidy is not being paid whether it is under-recovery or in whatever form.
The energy expert stressed that subsidy removal was not well-thought out and that it has a bad effect on inflation. He said the government should come out clean and tell Nigerians the truth, adding that the government can’t afford to be borrowing for a consumptive action.
Adigun said, “Transparency is not what I tell you; transparency is what you need to know that I tell you. So I can tell you something and I give you an aura of transparency but is that all that you need to know? Is it verifiable? Is it accurate?
“Let me give you an instance. Last year, the NNPCL, in its audited report, said it invested $2bn in Dangote Refinery. Now, in its (latest) audited report, it said $1.67bn. Who did the audit? It’s different to say it intends to, because intents are intents. But it claimed so until Dangote came out and said NNPC only invested 7.4% in his refinery.”
According to him, NNPCL’s audited financials have many gaps and Nigerians are only being shown what the company wants the public to know.
He said the rot in the oil and gas sector is from the top, and that it is structural. He said the NNPCL is “moving towards transparency, and not there yet”.
On its part, the Human Rights Writers Association of Nigeria (HURIWA) commended NNPCL for its display of transparency and accountability in releasing its 2023 audited financial statements,
HURIWA stated that the NNPCL’s declaration of a net profit of N3.3 trillion, alongside the announcement of a N2.1 trillion dividend, marks a significant milestone in the company’s history and represents a clear departure from the opacity and inefficiency that once characterized the former Nigerian National Petroleum Corporation (NNPC).
In a statement, HURIWA’s National Coordinator, Comrade Emmanuel Onwubiko, lauded the management of NNPCL under the leadership of the CEO, Mele Kyari, noting that the company’s impressive financial performance and commitment to openness signal a new era in Nigeria’s petroleum industry.
According to Onwubiko, the reborn NNPCL has demonstrated a commitment to upholding the principles of good corporate governance, a stark contrast to the previous practices that plagued the then NNPC.
He emphasised that NNPCL’s release of its audited financials, which showed a 28 increase in profit from the previous year, is a testament to the company’s resolve to operate with integrity and transparency.
“This is a remarkable achievement that reflects the positive changes implemented since NNPC transitioned to NNPCL. The company’s ability to post such impressive returns amidst the challenges in the operational and economic environment is commendable,” he stated.
He pointed out that the NNPCL’s progress in financial transparency is directly linked to the leadership of Mele Kyari, who assumed the role of Group Managing Director in 2019.
According to him, Kyari’s tenure has been marked by a series of transformative reforms aimed at improving the efficiency and profitability of NNPCL.
“Since taking office, Mele Kyari has demonstrated an unwavering commitment to repositioning NNPCL as a transparent and accountable entity.
“His leadership has ushered in a new era of corporate responsibility, which has now culminated in the remarkable financial performance recorded in 2023,” he noted.
In addition, he praised the NNPCL Board for its role in driving the company’s success, stressing that the approval of a final dividend of N2.1 trillion by the company’s shareholders, as announced by NNPCL Board Chairman, Chief Pius Akinyelure, was a reflection of the confidence reposed in the company’s management.
“The decision to declare such a substantial dividend underscores the commitment of the NNPCL Board and Management to delivering value to shareholders and contributing to Nigeria’s economic growth,” he added.
Most Nigerians have expressed misgivings over the recent NNPCL’s “impressive” performance without fixing the nation’s four refineries for over a decade, while the facilities continue to gulp huge resources under endless maintenance
THEWILL had reports that ten months after the Senate embarked on a probe of the endless maintenance of Nigeria’s moribund refineries in October 2023 without a report, the upper and lower legislative chambers jointly commenced a similar exercise in August 2024.
Following fresh controversies trailing the nation’s oil and gas industry, especially in the aspects of sabotage, corruption and oil theft, the House of Representatives named a seven-member committee to probe alleged economic sabotage in the oil and gas sector.
The panel headed by House Leader, Julius Ihonvbere, is to join the Senate in executing its task.
On its part, the Senate has raised an Ad Hoc Committee to Investigate the Alleged Economic Sabotage in the Nigerian Petroleum Industry. The upper legislative chamber had expressed concerns over the $1.5 billion approved in 2021 for the turn-around maintenance of the Port Harcourt Refinery with little or no result.
Opeyemi Bamidele, chairperson, Senate Ad Hoc Committee said it was unfair and wrong to treat public companies shabbily while private businesses were flourishing and thriving
He recalled that the Federal Executive Council had approved the plan by the Ministry of Petroleum Resources to rehabilitate and turn around the Port Harcourt Refinery with $1.5 billion
Nigerians have been grappling with petrol scarcity across the states with the commodity selling about N1,000 and above per litre in many states while black market operators have a field day.
The refineries spend billions of naira on salaries, wages and other benefits on workers despite producing no refined product in recent years. For instance, the Port Harcourt refinery reported no income in 2020 but incurred administrative expenses of N19.22 billion, according to its audited reports. The refinery employed 487 new staff members in 2020. Its directors received N99.75 million as emoluments in 2020, a 67 percent increase from N59.66 million in 2019.
The workers, among the highest paid in the country, earn their salaries, promotions, allowances and go on local and foreign training programmes while the facilities are idle.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
