Nigeria establishes NNPC Ltd as new NOC

Nigerian President Muhammadu Buhari has issued an order authorising the incorporation of Nigerian National Petroleum Corporation Ltd (NNPC Ltd), in line with Section 53(1) of the recently signed Petroleum Industry Act (PIA). This act lays the groundwork for the new company to replace an existing state-run entity, Nigerian National Corp. (NNPC), as Nigeria’s national oil company (NOC).

Femi Adesina, Buhari’s special advisor for media and publicity, said in a statement that the president had taken this step in his capacity as the country’s Minister of Petroleum Resources. The PIA “requires the Minister of Petroleum Resources to cause for the incorporation of the NNPC Ltd within six months of commencement of the act in consultation with the Minister of Finance on the nominal shares of the company,” he stated.

Adesina also noted that Buhari had approved the appointment of the new company’s board members and management, in line with Section 59(2) of the PIA. NNPC Ltd’s chairman will be Ifeanyi Ararume, a senator from Imo State, while NNPC’s current group managing director Mele Kyari will serve as CEO, he said. Umar Isa Ajiye, the CFO of NNPC, will hold the same position at NNPC Ltd, he stated.

“[The] other board members are: Dr. Tajudeen Umar (North East), Mrs. Lami O. Ahmed (North Central), Mallam Mohammed Lawal (North West), Senator Margaret Chuba Okadigbo (South East), Barrister Constance Harry Marshal (South South) and Chief Pius Akinyelure (South West),” Adesina added.

According to previous reports, NNPC Ltd will be a corporation and not eligible for direct state funding. This represents a departure from past practice, as NNPC has previously served effectively as an arm of the government. Officials in Abuja have said they hope the changes will make the NOC more transparent and accountable.

Kyari pointed out that the Nigerian government would be able to privatise the new entity, if it so chose. “[The] law provides that over time, [Abuja] can reduce the shareholding into some private shareholding. That means it can be floated subsequently as a company that is quoted on the stock exchange,” he said. “The intention at the very onset is not to go to that step, but there is provision in the law that allows us ultimately to sell shares of this company.”

He went on to say that NNPC’s replacement with NNPC Ltd would benefit the whole country. “This is very simple. This company will pay taxes and royalties, which are revenues that accrue to the federation. So every part of this country and every sub-national institution or government will benefit from it,” he was quoted as saying by the Vanguard newspaper. “Secondly, this company will pay company income tax that also comes to the federation for the benefit of all. So what is different is that this company will now have profit to make and declare dividends, which will be decided by the board of directors of this company.”