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The Nigerian National Petroleum Corporation (“NNPC”) is required under the new Petroleum Act (“PIA”) 2021 to change its structure to a 'commercially viable' entity in the form of a limited liability company. Since inception in 1977, through the transformations or restructurings, NNPC has been a state-owned, and state-run corporation. Like a behemoth bestriding the energy sector of the Nigerian economy but reputed for failing to deliver the expected profits to the owner, statutory changes have now been made in the PIA 2021 setting out the criteria and structure of how the new Nigerian National Petroleum Company Limited (“NNPC Limited”) will look and operate.
This short note will highlight some of the structural changes proposed for implementation in the PIA 2021. Judging from the vibes and decisions taken so far by the government since the President assented to the PIA 2021, it is heartening that government appears to be eager to implement the statutory and structural changes to the NNPC to make the NNPC Limited a world class company in the category of Saudi Aramco.
The changes are generally provided for in sections 53-65 of the PIA 2021.
By section 53 (2-5) of the PIA, the government of the Federation of Nigeria still holds full ownership of the NNPC Limited with the shares held by the duo of the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated on behalf of the government of the Federation. However, section 53 (5-8) evinces government's intention to set in motion the process of immediate commercialization and privatization of not only the operation of, but also a possible future private ownership of shares in the NNPC Limited. As nominated by the president, members of the board of NNPC Limited now incorporated are Senator Ifeanyi Ararume as the Chairman of the Board, Mele Kolo Kyari as Chief Executive Officer and Umar Ajiya Chief Financial Officer. Others Buhari appointed include “Tajudeen Umar (North East), Lami Ahmed (North Central), Mohammed Lawal (North West), Margaret Chuba Okadigbo from South East, Constance Harry Marshal also from the South South, and Pius Akinyelure (South West).
iii. NNPC Limited as agent of NNPC: By section 55 of the PIA, the NNPC Limited does not only replace the NNPC but also represents the latter's interests during the period of transition. Subsection 1 of section 55 provides that the Minister of Petroleum shall consult with his counterpart in the Ministry of Finance to appoint NNPC Limited as agent of the NNPC. The major job of the 'agent' is to wind down the assets, interests and liabilities of NNPC.
vii. Corporate Governance and Annual Audit of NNPC Limited: Members of the Board of NNPC Limited shall discharge their responsibilities in accordance with the highest standards, practices and principles of corporate governance and shall ensure that its annual audit is conducted by an independent, competent, experienced, and qualified, auditor. See sections 61 and 62.
viii. Special Responsibilities of the NNPC Limited Board: Section 63 of the PIA provides for specific responsibilities aimed at enhancing the commercial operations and best governance structure of the NNPC Limited. This is in addition to the responsibilities listed under the Companies and Allied Matters Act 2020 and the section is to be inserted into the company's memorandum and articles. Strategic guidance in determining structure of business, approval of annual budget, due care and good faith, highest ethical standards in performing duties, corporate strategy and business risk analysis and planning, ensuring integrity of accounting system, communication and determining dividend policy are some of the duties of the board. The board has its work well cut out, and the expectations are high.
Undoubtedly, the PIA proposes a paradigm shift from the old order in terms of structure, ownership, business method, and operational efficiency. The reform which has started holds a lot of promises which if well implemented could position NNPC Limited to rival the best of other national oil companies globally. We do hope that the swiftness shown so far in the implementation of the provisions of the PIA as relates to the NNPC Limited and other aspects of the reform will continue and politics or other factors will not be allowed to truncate or hinder things. Perhaps, with these reforms, the NNPC which has been mostly described as 'opaque' in the past can take its pride of place among corporate giants of repute not only in Nigeria but also in the global oil and gas industry.2
Footnotes
1. Section 93 of the PIA speaks generally to the relinquishment upon renewal or conversion of an oil mining lease.
2. See also our previous article on similar subject: “Behold the New Petroleum Industry Act, 2021″at https://www.mondaq.com/nigeria/oil-gas-electricity/1103114/behold-the-brand-new-nigerian-petroleum-industry-act-2021 and at http://www.spaajibade.com/resources/behold-the-brand-new-nigerian-petroleum-industry-act-2021/
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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