Perspective
By Ikechukwu Okorafor
National Oil Companies (NOCs) in Africa stand on the brink of significant disruption as a new era of structurally lower oil prices challenges business models that have long relied largely on exploration and production of hydrocarbons, especially crude oil.
This scenario fundamentally puts Mallam Mele Kolo Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), on the spot. Especially so, as the unassuming geologist, whose tour of duty has traversed the entire value chain of the petroleum industry, approaches his second year anniversary on the saddle. He was appointed GMD by President Muhammadu Buhari, on 8th July 2019.
Perhaps currently charting his toughest course in the transformation effort of an industry where he has spent much of his professional life in, Kyari has since responded to his top-draw responsibility by quickly taking charge and working in close synergy with his corporation’s oversight Ministry, the Ministry of Petroleum Resources. Within his 19-month trajectory, he has clearly demonstrated a fundamental grasp of what fossil energy means and the imperative of adroit governance of the giant National Oil Company.
He set sail by defining a clear vision to transform the NNPC and sending an unequivocal message that the corporation’s lukewarm governance narratives of the past are gone for good. With Kyari’s new vision for the corporation boldly anchored on the principle of Transparency, Accountability, Performance and Excellence (TAPE), he set sail. Rallying both staff and critical industry stakeholders to join the common cause, he stressed that going forward – excuses for poor performance were simply unacceptable. According to the new boss, “We either deliver or walk away in shame.” Most importantly, he is walking his talk, hence, the positive impact and changes to the new ways of doing things in the Corporation.
Besides its role as the bedrock of the Nigerian economy, the petroleum industry has been one of the key defining phenomena of the country’s post-independence history. This fact centralizes NNPC in the nation’s political economy, given the corporation’s assigned role in the industry.
Perhaps, this unique centrality of the corporation in the Nigerian state has spawned its fair share of challenges and reproach. A 2010 joint report by Transparency International and Revenue Watch Institute found that NNPC had the poorest transparency record out of 44 national and international energy companies examined.
Beyond TI’s report, today’s disruption is happening at a scale and speed unprecedented in modern history. From the petroleum industry to several critical sectors – business models are supending operations around the globe, and leaders are struggling to cope.
Put simply, to thrive in the murky waters of rapid technology and business model changes, organizations require the right leadership. For any leader, having a clear vision and articulating it well is a core competency.
A powerful vision pulls in ideas, people and other resources. It creates the energy and will to make change happen. It inspires individuals and organizations to commit, to persist and to give their best. This turf incidentally is Mele Kyari’s forte – vision, discipline, persistence, humility and focus.
One of the most important governance initiatives that have dealt a death blow to the corporation’s reputation of extreme operational opacity is “Operation White.” It is a presidential-mandated collaborative initiative driven by NNPC with the active participation of regulatory and security agencies as well as other stakeholders in ensuring that all molecules of regulated petroleum products imported by NNPC are well accounted for and utilised in the country. This initiative effectively ended the era of lack of transparency in the corporation’s governance style.
According to Kyari, as a control mechanism, the ‘Operation White’ has so far produced significant results as the corporation now clearly knows the areas of losses as well as reliability and integrity status of each and every facility under its control.
In June 2020, for the first time in 43 years, the Kyari-led NNPC released the 2018 Audited Financial Statements – and subsequently 2019 – to the public for scrutiny, earning plaudits for the corporation from members of the public.
Not surprisingly, on account of this unprecedented governance positive, top industry players, eminent stakeholders and the conservative Nigeria Extractive Industries Transparency Initiative (NEITI) lauded the decision of NNPC to make public its audited accounts for the first time in its history with the publication of its 2018 and 2019 Audited Financial Statement (AFS) on its website.
Even the ravages and disruptions of the dreaded Novel Coronavirus pandemic (COVID-19) have not derailed the focus and integrity of service delivery and operational stability and reasoned interventions by Mallam Kyari the earthy, humble leader who has notched 19 eventful months in office as the Group Managing Director of the NNPC.
Significantly, early in February, the NNPC again expressed its commitment to moving the national oil company from its opaque past towards being a more transparent global organisation. Speaking when he received the “Government Agency of the Year 2020 (Transparency)” from the New Telegraph Newspaper, an elated GMD-NNPC Kyari said the company had since realised that it pays to be transparent and accountable at all times.
He reiterated management’s resolve to drive the corporation along the line of Transparency, Accountability & Performance Excellence (TAPE) agenda, noting that the media interest in the activities of the corporation and the oil and gas sector was a welcome development. Further, he expressed delight that efforts of the management to entrench the culture of transparency in the system have begun to receive recognition within and outside the corporation.
Earlier in January, an appreciative Governor Ifeanyi Okowa of Delta State had also felicitated with the GMD-NNPC during his 56th birthday and commended his efforts in achieving great reforms at the NNPC.
Okowa noted that the Corporation, under the management of the GMD has attained 1.5 billion Standard Cubic Feet production per day and its equity production at 1.38 billion cubic feet of gas per day as at November 2020.
His words: “Malam Kyari’s leadership at the NNPC as its 19th Chief Executive has been largely characterised by outstanding vision in commitment to efficiency, openness, transparency and prudence in service delivery geared at attaining the objectives of the corporation and meeting the expectations of shareholders.
“The NNPC and its joint venture partners under his leadership have continued to contribute to poverty reduction, economic and social development, especially in the fight against COVID-19 pandemic.”
Okowa further noted that the Corporation, with the Transparency, Accountability and Performance Excellence agenda, as introduced by the GMD has become more profitable over the years. According to the Delta governor, “Let me commend Malam Kyari and his team for what they are doing to improve on the operations of the NNPC. Kyari has continued to demonstrate transparency and accountability by publishing the monthly operational report of the NNPC, with a step further of publishing its annual audited financial statement, which had not been done in 43 years of its operations.
“Worthy of commendation is the Final Investment Decision on the four billion-dollar NLNG Train 7 and his continued drive towards completing long-standing gas infrastructure projects such as the Escravos-Lagos Pipeline System Phase 2 and Obiafu-Obrikom-Oben gas pipeline.”
The public perception of NNPC has clearly changed in recent times. The credit goes to the efforts of Mallam Kyari and his management team – especially on the transparency turf.
According to advocates of corporate ethics, one key effect of transparency on any organization, besides showcasing its honesty and integrity, is that it helps to scale up performance as well as put managers on their toes to do their best knowing that there is no room to hide their inefficiencies.
A scrutiny of the NNPC’s 2019 audited financial account further authenticates of the theory that commitment to transparency leads to achievement of improved performance. For example, the Corporation reported a huge reduction in losses as it posted a loss of N1.7 billion in 2019 as against N803 billion losses reported in 2018.
Although, there remains considerable room for improvement, it is indisputable that the huge cut in losses is indicative of an emerging new era of growth for the Corporation. Further data of how the cost optimisation was achieved in the 2019 AFS revealed that general administrative expenses was trimmed down from N894 billion in 2018 to N696 billion translating into a positive variance of 22 per cent.
More, the majority of NNPC’s subsidiaries posted improved performance namely, the Nigerian Petroleum Development Company Limited (NPDC) which recorded N479 billion profit in 2019 compared to N179 billion in 2018 representing 167 per cent increase; the Integrated Data Services Limited (IDSL) recorded N23 billion profit in 2019 compared to N154 million in 2018 representing 14,966 per cent increase; the Petroleum Products Marketing Company (PPMC) recorded N14.2 billion profit in 2019 compared to N9.3 billion in 2018 representing 52 per cent increase; while the Refineries have maintained the same level of losses as in 2018 but which will reduce significantly in 2020 due to cost optimisation drive.
These disclosures were made by NNPC’s Chief Financial Officer (CFO), Mr. Umar Ajiya. According to him, the 2019 financial year performance was driven mainly by cost optimisation, contracts renegotiation and operational efficiency.
According to optimistic analysts, if the current trajectory is followed, it is possible that 2020 will see NNPC on a solid profit path since its management has sustained the drive to reduce cost, promote efficiency, and rev up profits.
Looking at the big picture, Nigerians remain optimistic that the NNPC is indeed on the march to fulfill its glorious destiny as the biggest and most profitable national oil company in Africa. Navigating with transparency is clearly the way to go.
Okorafor writes from Lagos.
