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The much-awaited restructuring of Nigeria’s national oil company, Nigerian National Petroleum Corporation (NNPC), was unveiled on Tuesday by Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu. The restructuring is part of the efforts by President Muhammadu Buhari’s administration to reposition the loss-making oil company and eradicate the institutional corruption that has constrained efficiency and profitability over the years.  
    
Apart from corruption, which has been the bane of the NNPC, fuel subsidies, oil theft, pipeline vandalism, tenuous crude oil swap agreements and malfunctioning refineries are areas that account for the revenue leakages in the company. In its Monthly Financial and Operations Report for August 2015, the NNPC announced a loss of N378.49 billion for the first eight months of last year. According to the Minister, refineries were among the largest operational loss-making ventures of the NNPC.

Kachiku said four new companies have been added to the 16 companies that made up the NNPC, taking the total number of companies currently under the national oil company to 20. He said the company will, henceforth, operate under five major divisional groups, namely, Upstream, Downstream, Gas and Power Refineries and Ventures, which will be business-focused. With the reforms the administration is carrying out, the Minister expects that by the end of the year, the NNPC should begin to turn in a profit.

“It is a five business focused unbundling and they all report to the GMD and the whole idea is to focus everybody that it is no longer an administrative but business role. The group is going to become more nimble,” Kachikwu, who is also the Group Managing Director of NNPC, said in a statement on Tuesday.
   
Nigeria's oil sector contributed 8.06 percent to total GDP in the fourth quarter of last year, down from 8.97 percent recorded in a similar quarter of 2014, according to a new report by the National Bureau of Statistics. (The non-oil sector contributed 91.94 percent to Nigeria’s GDP in Q4 2015). But oil still accounts for a large proportion of government’s revenue and the source of the country’s foreign exchange. As oil prices have fallen by over 60 percent in the last 20 months to the current $40 per barrel price threshold, consolidated government revenues have declined from between 60-70 percent before the oil price shock to 40 percent today.

Oil production levels have also declined from 2.19 million barrels per day in 2014 to 1.9 million bpd in January 2016. With the restructuring and repositioning of the NNPC, the Buhari administration hopes to increase production by reducing oil theft, properly managing the pipelines and having functional refineries to cut down the cost of importing refined petroleum products for domestic consumption.  

Kachikwu said the country needs $500 million to have the refineries back to full capacity and meet the government’s target of ending importation of petrol in the next 18 months. To achieve this, the Minister said there are ongoing discussions with new joint venture partners to co-locate and build new refineries alongside the country’s four existing refineries in Kaduna, Warri and Port Harcourt.

“We have advertised recently for co-located refineries and asking people to come and co-locate new refineries into our refinery premises so that they can share pipelines, tankages, and we are working hard to see that we can complete whatever refinery upgrade we are trying to do within the next 12 to 18 months,” Kachikwu stated.  

On fears that the restructuring will lead to job losses at the NNPC, the Minister of State for Petroleum Resources and GMD of NNPC said the restructuring has been done in a way that it does not lead to job losses. However, it would ensure more efficiency and productivity of the workforce. After the announcement by Kachikwu, oil workers under the umbrella of the National Union of Petroleum and Natural Gas Workers (NUPENG) and Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) have embarked on an indefinite strike stating the disregard of due process by the GMD.

The House of Representatives has also raised concerns about the legality of restructuring the NNPC without legislative approval. The House or Representatives said yesterday that the Act establishing the NNPC has to be duly amended for this restructuring process that involves creating new companies under the NNPC to be legitimate.

In his response, the Minister said no law has been broken as the process does not involve unbundling of the NNPC as prescribed by the Petroleum Industry Bill (PIB) which is yet to be passed into law.  

Kachikwu said NNPC “remains the same entity but with different units internally for enhanced efficiency and profitability. Besides, the NNPC Act allows for the restructuring of NNPC.”