Emmanuel Addeh
For the third time since it was established 44 years ago, the Nigerian National Petroleum Corporation (NNPC) yesterday officially released its Audited Financial Statement (AFS) for year 2020.
With the development, the corporation has now joined other state-owned global oil concerns that publish the details of their operations, to among others, boost investors’ confidence and enhance business transparency.
President Muhammadu Buhari last month announced a profit after tax (PAT) of N287 billion for the NNPC for the financial year ended 2020 and had directed the corporation to ensure prompt publication of its AFS in line with the requirements of the law.
The latest financial statement of the national oil company showed that aside the already announced PAT, from a loss position of N1.7 billion in 2019, to N287 billion in 2020, NNPC’s total current assets increased by 18.7 per cent compared with that of 2019, while its total current liabilities increased by 11.4 per cent within the same period.
In addition, the group’s working capital remained below the line at N4.56 trillion in 2020, as against N4.44 trillion in 2019, while the corporation’s group revenue for the 2020 financial year stood at N3.718 trillion as against N4.634 trillion in 2019.
According to the national oil company, the decrease in the group’s revenue could be attributed to the decline in production and price of crude oil due to global impact of Covid-19.
The corporation first published its AFS last year, the first being for 2018 and the second dealing was on its activities for 2019.
But the NNPC’s independent auditors, namely PriceWaterhouse Coopers (PwC), SIAO Partners and Muhtari Dangana & Co, drew attention to a section of the document which indicated that the corporation’s liabilities still outstripped its assets.
The auditors stressed that though the NNPC announced a profit of N287 billion, but the large discrepancy between assets and liabilities cast some uncertainty on the corporation’s operations.
“We draw attention to note 42 of the consolidated and separate financial statements, which indicates that the group recorded a net profit of N287.2 billion (Corporation: N235.3 billion) during the year ended 31 December 2020 and, as at that date, the group’s current liabilities exceeded its current assets by N4.6 trillion (Corporation: N729.1 billion).
“As stated in note 42, these events or conditions, along with other matters as set forth in note 42, indicate that a material uncertainty exists that may cast significant doubt on the group and corporation’s ability to continue as a going concern. Our opinion is not modified in respect of this matter,” they noted.
The newly released AFS also indicated that the NNPC recorded a profit before tax of N719 billion in 2020, compared with N93 billion loss in 2019, and a total comprehensive income of N655 billion compared to a loss of N20.1 billion last year.
The financial statement was signed by the Group Managing Director of the corporation and the Chief Financial Officer, Mallam Mele Kyari and Mr Umar Ajiya respectively and was dated September 3.
However, despite their misgivings, the auditors stated that records showed an improvement from prior year based on several group improvement efforts put in place by management, including elimination of the cost drivers responsible for the accumulation of the shortfalls in settling domestic crude obligation to Federation Account.
The auditors further acknowledged the introduction of the Price Modulator mechanism in the Petroleum Products Pricing Regulatory Agency (PPPRA) template designed to eliminate the major cause of the losses as well as minimising the breaches to pipeline networks.
Under the Petroleum Industry Act (PIA), they projected that the NNPC when given the autonomy, would operate profitably, noting that the recapitalisation of the corporation would enable the resolution of all outstanding related party payables and receivables to enable NNPC start on a clean slate.
Kyari had while explaining how the NNPC arrived at the profit, attributed it to aggressive cost cutting, automation of the NNPC system and renegotiation of contracts downwards by about 30 per cent, among other tough measures.
During the year, the NNPC said it donated a total sum of N3.6 billion and N9 million respectively to various charitable organisations, higher education institutions and other organisation, while no donation was made to any political party.
