Financial Statements: A New Era Of Transparency For NNPC

By Adewole Kehinde

I attended the launch of the 2020 Nigerian States Budget Transparency Survey Report put together by the Civil Resource Development and Documentation Centre (CIRDDOC) last week and this as prompt me to write about financial statements and transparency using the Nigerian National Petroleum Corporation as an index.

Nigeria’s Oil and Gas sector accounts for about 50% of government income and 90% of its foreign exchange earnings. Yet the COVID-19 pandemic has significantly affected these revenues, with crude oil prices falling to a record 18-year low of about USD 20 per barrel in April 2020.

The Federal Government had to revise its budget, cutting projected benchmark prices for crude oil from $57 to about $30 per barrel.

These realities have positioned the Nigerian National Petroleum Corporation; being the main revenue generating organisation in Nigeria, to play a vital role in increasing revenue to meet the government’s budget constraints and strengthen the Nation’s economy.

The record breaking publication of Nigerian National Petroleum Corporation’s financial statements, in addition to other disclosures which indicates that transparency is becoming an integral and routine feature of NNPC’s governance and management systems is no longer news.

The beauty of it is that these disclosures now allows stakeholders and citizens to examine Nigerian National Petroleum Corporation’s operations, thereby providing an avenue for public debate around the management of Nigeria’s natural resources.

The NNPC’s disclosure has helped to address pressing governance challenges, enabling the government and public to have oversight of important revenue streams at a time when Nigeria’s economy is under strain. The publication of financial statements is key to ensure that Nigerian National Petroleum Corporation is held accountable and shows a good example for other state-owned enterprises (SOEs) in the region.

The Nigerian National Petroleum Corporation’s Group Audited Financial Statement presents key information on the corporation’s financial health. The statement shows that NNPC reduced its loss by 99.7%; from N803 billion in 2018 to N1.7 billion in 2019, thanks to a significant increase in profits from its subsidiaries between 2018 and 2019.

These include:

A nearly 15,000% increase (N23 billion Profit in 2019) by the Integrated Data Sciences Limited (IDSL)

A 167% increase (N478 billion Profit in 2019) by the Nigerian Petroleum Development Company (NPDC)

A 124% increase (N2.83 trillion Profit in 2019) by the National Petroleum Investment Management Service (NAPIMS)

A 52% increase (N14.2 billion Profit in 2019) by Petroleum Products Marketing Company (PPMC)

A 15% increase (N10 billion Profit in 2019) by the Nigerian Gas Marketing Company (NGMC)

These significant gains mean that Nigerian National Petroleum Corporation will need to spend less of its resources offsetting losses and puts the Corporation on course to generate profit from its operations, which could help to maximize revenues for the state.

It will be recalled that the NNPC’s Chief Financial Officer, Mr. Umar Ajiya, had explained that the improved performance in the 2019 financial year was mainly attributable to operational efficiency, cost optimization and contract renegotiations. According to the disclosures, NNPC reduced its administrative costs by 22% between 2018 and 2019.

The Federal Government should as a matter transparency ensure that all the Ministries, Departments and Agencies are externally monitored by the Extractive Industry Transparency Initiative, even though its major focus area is Extractive, the EITI will help promote transparency and Accountability.

It is time all Federal and State Government Ministries, Departments and Agencies build on the NNPC milestones, to champion accountability and transparency by following suit.

Adewole Kehinde is a public affairs analyst and publisher of Swift Reporters. He can be reached via 08166240846, 08123608662