20th Anniversary of Transforming the Nigerian National Petroleum Corporation (NNPC) 1988

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20th Anniversary of Transforming the Nigerian National Petroleum Corporation (NNPC): 1988 – 2008
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Abubakar Atiku Nuhu-Koko

<aanuhukoko@yahoo.com>

 

March 22, 2008

Last month February 2008, Nigeria marked 50 years (1958-2008) of commercial oil discovery and export on February 17 2008. A number of activities including public lectures, radio and television discussions and articles published in newspapers and magazines analyzing the journey thus far were organised to mark this historical landmark in Nigeria’s socio-economic development.  

However, March 23 2008 marks the 20th Anniversary (March 23 1988 – March 23 2008) of the first major restructuring exercise of the Nigerian National Petroleum Corporation (NNPC). It would be recalled that, the NNPC was created in 1977 with the merger of the then pioneer Nigerian National Oil Corporation (NNOC), which was established in 1971 and the then Federal Ministry of Petroleum Resources during the Murtala – Obasanjo regime. 

However, it was under the supervision of the then Minister of Petroleum Resources, Dr Rilwanu Lukman, on March 23 1988 that the NNPC was first reorganized into its present day structure. Thus, March 23rd 2008 is yet another very important landmark in the annals of the historical development and transformation of public ownership, governance and management of the Nigerian oil and gas sectors.  

The significance of this date is best viewed from the current attempt by President Yar’Adua to undertake yet, another major restructuring of the NNPC and crafting new institutional frameworks for public ownership, governance and management of the Nigerian oil, gas and power sectors respectively.  

This initiative coming nearly 20 years after the first similar exercise clearly shows that it is timely but long overdue; depending on how one looks at the issues and reasons behind the current exercise. By providence, the current reform and restructuring exercises are undoubtedly being carried out under the supervision of Dr Rilwanu Lukman, once again. 

However, Dr Lukman’s involvements in the restructuring of the NNPC and Nigeria’s oil and gas sector reforms needs to be put into proper historical perspective and context. His involvement as mentioned earlier above, dates as far back as mid-1980s when he held sway as Nigeria’s Minister of Petroleum and Energy Resources (1986-1989); first, under the military regime of General Ibrahim Badamasi Babangida’s (IBB) military regime (1985-1993). 

Secondly, Dr Lukman was the Special Adviser on Petroleum Resources and Energy Matters under President Olusegun Obasanjo (1999-2004). Thirdly, in the present dispensation, Dr Lukman is serving as the Honorary Special Adviser on Petroleum, Energy and Strategic Matters to President Yar’ Adua. 

Thus, Dr Lukman has by luck and coincidence, being involved with and associated the past and current restructuring exercises of the Nigerian oil and gas industry. Therefore, looking back into history of the making of the NNPC, it was actually in 1985 that what can be considered as a minor restructuring of the NNPC initially took place. For example, according to NNPC sources, it was in 1985, when the overly centralized administration, management and functional structural organization of the NNPC was “restructured into five (5) semi-autonomous sectors, each headed by a Sector Coordinator who functioned as Chief Executive Officer” (NNPC, 1992). These were: 

  1. Oil and Gas with headquarters in Benin;
  2. Refineries with headquarters in Kaduna;
  3. Petrochemicals with headquarters in Port Harcourt
  4. Pipelines and Products Marketing with head offices at Mosimi, near Shagamu and,
  5. Petroleum Inspectorate with headquarters in Lagos.

 

It was these five (5) entities that were later transformed into the present organizational structure of the NNPC in a major restructuring exercise that was announced by Dr Lukman, the then Nigerian Minister of Petroleum and Energy Resources on March 23 1986.  

Prior to the ministerial announcement of the restructured NNPC, President Babangida had earlier on Monday March 21, 19988, made a public pronouncement to the effect that “the NNPC was going to be reorganised and put on a more solid footing to operate as a commercial organization rather than as a parastatal of government” (NNPC, 1992).    

It also expedient to place the restructuring of the NNPC at that time into proper perspective and context; it was rooted in the economic reform philosophy of the administration which emphasized privatization and commercialization of public enterprises. The same economic philosophy underpins the current reform initiative of the Yar Adua’s administration in the oil, gas and power sectors respectively. 

Again, Dr Lukman’s involvement in the current restructuring of the Nigerian oil and gas sectors also has its historical antecedent; it dates back to 1999 when he was appointed by former President Obasanjo as his Special Adviser on Petroleum Resources and Energy Matters (1999-2004).  

It was in that capacity that Dr Lukman was shouldered with the onerous task and responsibility of transforming the parlous state of the nation’s oil and gas sector. Specifically, in April 2000, the then Nigeria’s President Chief Olusegun Obasanjo inaugurated the Oil and Gas Sectors Reform Committee (OGSRC). The OGSRC was headed by the then Vice President, Atiku Abubakar. 

OGSRC was charged to articulate and produce a policy document that would not only stand the test of time, but would afford the nation the opportunity to benefit maximally from its vast oil and gas resources. 

President Obasanjo also set up another committee, the National Committee on Oil and Gas Policy (NCOGP) independently of the OGSRC. This had Dr Bright Okogu, a former chief energy economist at OPEC, as chairman. Dr Okogu also held the positions of Special Adviser to the then Hon Minister of Finance, Dr Ngozi Okonjo-Iweala and at the same time, head of the Oil and Gas Accounting Unit of the Ministry of  Finance and Acting Executive Secretary of the Nigerian Extractive Industries Transparency Initiative (NEITI). He is presently the substantive Director General, Budget Office in the Yar’Adua’s administration.  

Yet, a third committee, Oil and Gas Implementation Committee (OGIC) was set up by President Obasanjo, with Dr Edmund Daukoru, Obasanjo’s new Special Adviser on Petroleum and Energy Matters as its chairman (Dr Lukman had then resigned from the same position in 2004). Dr Edmund Daukoru also served as the Group Managing Director (GMD) of NNPC in the 1990s. 

This time, the OGIC was given the remit to work out how to implement the findings of the other two previously established committees (i.e., OGSRC and NCOGP). The major recommendations of these Presidential Committees (i.e., OGSRC, NCOGP and OGIC respectively) are summarized below as follows: 

1. The recommendations of Okogu’s NCOGP included the following: 

    a) That government should continue to meet its cash call obligations to ensure that the integrity of its upstream assets was maintained. It would not be in the long-term interests of the government to sell its entire stake in the upstream sector to solve cash call payment problems.

    b) The commercialisation of NNPC with a proviso that the company be granted autonomy. 

    c) That the federal government continues it deregulation policy at the same time as ensuring that the gains of the policy were used for social and infrastructural reforms. 

      d) The refurbishing, commercialisation and privatisation of the refineries. 

    e) The encouragement of private investors to invest in the establishment of private refineries. 

    f) That government should develop an effective communications strategy to sensitise the public to the rationale for subsidy withdrawal. 

    g) That products like kerosene be subsidised but coloured to discourage diversion. 

    h) That an integrated and seamless oil and gas policy is needed for the country to help eliminate ambiguities in the operation of the industry. 

2. In June 2005, the reconstituted OGIC under the headship of Dr Edmund Daukoru, was given a mandate to develop strategies for the implementation of the content of the proposed new oil and gas policy documents developed earlier by the now-defunct OGSRC and NCOGP.  

The proposed new Oil and Gas Policy examines the operations of the refineries, pipelines, depots and retail outlets, recommends full deregulation of the sub-sector, as well as measures to revamp the operating agreements, contracts and Memoranda of Understanding (MOU) governing the operations of the upstream oil and gas sector.  

Part of its content is the detailed enumeration of institutions that should emerge in the sub-sectors and their responsibilities. The local content issue was extensively examined while recommendations were put forward for upgrading local and indigenous participation in the oil and gas reforms.  

Furthermore, the proposed new oil and gas policy stresses the need for a review, an amendment and the harmonisation of various existing laws that would ensure that all-encompassing petroleum legislation is developed to deal with all the major areas relating to the oil and gas industry.  

In addition, Health, Safety and Environmental issues, including responsibilities of relevant stakeholders in the industry were listed, with recommendations made to ensure a mutually-beneficial relationship between the host communities, the oil and gas operators and the government. The reconstituted OGIC set up five sub-committees as follows: 

    a) National Petroleum Directorate (NPD), with Chamberlain Oyibo, a former Group Managing Director/CEO of NNPC as chairman. 

    b) Petroleum Inspectorate Commission (PlC), with Mohammed Ibrahim as chairman. 

    c) National Oil Company (NOC), with Onaolapo Soleye, a former Minister of Finance, as chairman. 

      d) National Petroleum Research (NPR), headed by Professor Nuhu Obaje. 

    e) Petroleum Products Distribution Authority (PPDA), with Mansur Ahmed, also a former GMD/CEO of NNPC as chairman. 

3. A drafting and harmonisation committee, with Professor Yinka Omoregbe as chairman and Irene Chigbue of the Bureau of Public Enterprises (BPE), Chief (Ms) Sena Anthony (Group Legal Counsel, NNPC) and Koyode Oloketuyi as members, was then set up by the implementation committee. 

At the completion of its assignment the OGIC submitted its report to government. It recommended full deregulation of the sector and the review and harmonisation of the laws governing the sector, among other things. It proposed the splitting of NNPC into five (5) independent companies as follows: the NPD, the PlC, the NOC, the National Petroleum Resource Centre (NPRC) and the PPDA. 

The new management structure being proposed is almost entirely in line with the recommendations of the old OGIC, with the exception of the new name for National Petroleum Investment Management Services (NAPIMS), which is now to be known as the National Oil and Gas Assets Holding Company (NOAGAHC). 

But to the surprise of many, President Obasanjo preferred to let things remain as they were. The only thing he did was to appoint Dr Edmund Daukoru as minister of state for petroleum resources. So it was with a certain relief that stakeholders welcomed the present Yar’Adua administration’s decision to dig out the OGIC report and accept its recommendations. 

Now, as the Chairman of the Yar’Adua’s rejuvenated OGIC, Dr Lukman is further blessed and trusted with onerous task of overseeing the review and implementation of the hitherto abandoned expensively produced reports of the Presidential Committees on Oil and Gas Reform, which contains highly valuable recommendations for transforming the parlous oil and gas sectors. 

So far the administration has established a National Energy Council (NEC) chaired by the President himself and inaugurated a number of working committees and assigned them with various tasks. For example, a 22-member Committee on legislative framework for oil and gas sector reforms charged it with the responsibility of ensuring that the required legislative work is undertaken before the commencement of his Administration’s planned restructuring of the sector was inaugurated by President Yar Adua on September 7, 2007.  

The 22-member Committee is headed by Dr. Lukman and is to work under the guidance of the National Energy Council. This committee and another one on power sector reform similarly headed by Dr. Rilwanu Lukman will undertake the serious task of reorganizing Nigeria’s oil and gas sector, and finding urgent and workable solutions to its power supply problems.  

The Committees were given six (6) months to complete their respective assignments. However, it is now getting to seven months since these reform committees were inaugurated and they are yet to complete the tasks.  

In conclusion, despite the obvious gains that the unbundling is sure to achieve, some industry players are worried that it may create organisational problems that if not properly handled may undermine the whole object of the reforms.  

Again there is question of how government can hope to do away with the NNPC – a corporate body with various existing legal obligations to its partner joint venture companies and other business entities locally and abroad. Therefore, how soon the gains of the unbundling will reflect on the national economy remains a matter of speculation. 
 

Abubakar Atiku Nuhu-Koko

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