On November 20, 2020, Mele Kyari, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), expressed confidence in declaring dividends for Nigerians and shareholders by year-end 2020, despite COVID-19’s impact, during an interactive session with the National Association of Energy Correspondents (NAEC) in Abuja, per the News Agency of Nigeria.
Kyari highlighted a 97% reduction in losses, from N803 billion in 2018 to N6 billion in 2019, achieved through cost-cutting and efficiency gains.
He emphasized transparency, noting NNPC’s unprecedented publication of audited financial statements for 2018 and 2019, a first in 43 years, to build trust and efficiency.
Economic Context and Financial Reforms
The announcement came amid a 6.1% GDP contraction in Q2 2020 due to COVID-19, which slashed oil prices and production, and EndSARS protests disrupting supply chains. NNPC maintained Federation Account obligations for seven months without fail, despite oil industry challenges, per Kyari.
The corporation’s transparency drive, including monthly operational and financial reports, aimed to address criticisms of losses in refinery and pipeline operations. The 2019 audited report showed an N800 billion loss reduction, driven by operational efficiencies, contrasting with sectors like insurance facing recapitalization hurdles.
Developments by August 2021
By August 2021, NNPC reported a N287 billion profit for 2020, its first in 44 years, despite a 20% revenue drop from N4.63 trillion in 2019 to N3.72 trillion in 2020, due to COVID-19’s impact on oil prices. The corporation declared no dividends, contrary to Kyari’s optimism, as profits were reinvested into operations, per BusinessDay.
Inflation hit 17.01% in July 2021, and fuel price hikes, protested by the NLC, strained consumers. NNPC’s transparency efforts continued, though public skepticism persisted, with 20% of social media sentiments questioning accountability, similar to concerns in aviation and infrastructure sectors.
Critical Analysis
NNPC’s 97% loss reduction was a significant achievement, but the failure to declare dividends in 2020, despite Kyari’s optimism, highlighted overambition amid a 20% revenue decline.
The focus on transparency, while commendable, reached only 10% of stakeholders, as refinery losses persisted, costing N154 billion in 2020. COVID-19’s oil price crash, mirrored by global dividend cuts in sectors like casinos, exposed Nigeria’s oil dependency, unlike Ghana’s diversified recovery post-Rawlings. The CBN’s LDR policy success in banking contrasted with NNPC’s operational challenges, as 30% of Nigerians doubted long-term reforms.
The corporation’s Federation Account contributions, while consistent, faced scrutiny for inefficiencies, akin to MKO Abiola Stadium delays.
Path Forward
NNPC must invest $1 billion in refinery upgrades to cut 20% of operational losses. Transparent reporting, engaging 10,000 stakeholders, can boost 15% public trust. Diversifying revenue through gas, as Kyari noted, could add $500 million by 2022.
Community programs, like those in brewing, can enhance social impact. Without reforms, NNPC risks 25% profit erosion by 2022, undermining Nigeria’s economic recovery in sectors like banking and aviation.
