- Says Poor Corporate Governance, Gross Inefficiency Bane Of Corporation
The Nigeria Natural Resource Charter, NNRC has revealed that holistic improvements, strong corporate governance with capital, and operational excellence will be required if the Nigerian National Petroleum Corporation, NNPC is to achieve its potentials and be ranked alongside other National Oil Companies, NOCs across the world.
This is according to Ms. Tengi George-Ikoli, Program Coordinator of the NNRC in a statement recently.
“Holistic improvements across the NOC will ‘require clear and appropriate decisions and role of the NOC and how it is financed, corporate governance systems that limit political interference and allow for efficient oversight, and a commitment to transparency and accountability.
It is expected that the NOCs that will succeed in maximizing their potential enterprise value and thus maximize their revenue contribution to the nation, will be those who succeed at building strong governance along with capital and operational excellence into their culture” she said.
Recall that the NNRC is a non-profit policy institute committed to effective natural resource governance in Nigeria.
In carrying out its mission, the charter had released a scathing report on the NNPC saying the corporation has been blighted by poor corporate governance and gross inefficiency.
Furthermore, NNPC, according to the report has fared poorly when compared to other counterparts in Africa and globally in the areas of operation capacity, revenue generation, and others.
“Comparing Norway’s Equinor and NNPC’s performance records show that Equinor’s three refineries averaged 92.8 percent capacity utilization in 2018 while NNPC’s three refineries recorded 11.21 percent. A 2015 comparison of average refinery capacity utilization in the USA of 90.98 percent and Nigeria of 4.88 percent is even worse.
In the area of revenues accruing to government, NNPC’s performance when compared to Petrobras (of Brazil), or Petronas (of Malaysia) shows gross inefficiency. Even when benchmarked with similar national oil companies in Africa such as Sonatrach of Algeria and Sonagol of Angola, the NNPC still falls short on different counts,” she noted.
She also noted that poor corporate governance poses a big challenge to the growth of the NNPC.
“It is noteworthy that peer group companies that are wholly government-owned like the NNPC do have strong governing boards constituted by competent professionals, instead of a preference for political representation. The NNPC is the only NOC with a serving government minister on its board. This brings unintended political baggage which impacts negatively on the smooth running of the organization.
Closely linked to governance, management and delivery is the concern for organizational flux. Compared to other NOC’s the NNPC has had far more executive turnover. Unlike Petronas where the average tenure of a CEO is six years and nine years in Saudi Arabia’s Aramco, NNPC, by contrast, has had 20 Group Managing Directors, GMDs in 42 years, an average tenure of 2 years per chief executive” she pointed out.
Read also: At Last, FG To Stop Paying Oil Subsidy
She also disclosed that in order to reform the NNPC, there is a need to rethink and restrategize starting with the recognition that NNPC was not designed, from the onset, to be a commercially driven enterprise.
“Had it been so, it would have been capitalized, granted more operational autonomy, and burdened with fewer regulatory functions as in the NNPC Act. Its governing board would reflect that of a commercial enterprise, even if government-owned like Saudi’s Aramco, with fewer ‘political appointees” she added.
She however believes the enactment of the Petroleum Industry Bill, PIB will provide a good platform to remedy the deficiencies in particular as it goes to greater lengths to separate commercial entities from regulatory authorities, leaving the national oil company to focus on finding, producing and commercializing petroleum resources.