The Nigerian National Petroleum Company Limited (NNPC) has announced a record-breaking net profit of N3.297 trillion for the financial year ending December 2023, marking a remarkable 28% increase from the N2.548 trillion profit reported in 2022.
This growth represents an impressive N749 billion rise in profitability, reinforcing the company’s financial strength amid a challenging economic and operational environment.
The NNPC has also declared a substantial final dividend of N2.1 trillion, demonstrating its robust financial health and commitment to shareholder returns. During a press conference at the NNPC Towers in Abuja, the company’s Chief Financial Officer, Mr. Umar Ajiya, attributed this success to strategic foresight and operational resilience.
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He stated, “Our fiscal performance reflects both strategic foresight and operational resilience. Despite inherent challenges of our operational and economic environment, we have improved the productivity and the financial performance of this great company.”
The company’s financial performance has followed a continuous upward trend since it first recorded a profit in 2020. In 2018, NNPC reported a loss of N803 billion, which was reduced to N1.7 billion in 2019. The company turned the tide in 2020, reporting N287 billion in profit, followed by N674.1 billion in 2021, and an impressive N2.548 trillion in 2022.
This turnaround can be largely credited to the Petroleum Industry Act (PIA) 2021, which has driven significant changes in the governance and financial management of NNPC.
Chief Pius Akinyelure, Chairman of the NNPC Board, highlighted the role of the PIA and the dedication of the Board, Management, and staff. He said, “The excellent performance came as the fruit of the PIA 2021, the commitment of the Board, Management, and staff of the company.”
In addition to its financial success, NNPC has set an ambitious goal of reaching 2 million barrels per day (bpd) in crude oil production by the end of December 2024. The new oil production target comes against the backdrop of the NNPC’s inability to fulfill its crude oil supply obligation to Dangote Refinery.
Oritsemeyiwa Eyesan, Executive Vice President of Upstream, attributed this goal to the government’s renewed efforts to combat crude oil theft and pipeline vandalism, which have historically hampered production levels. She noted that improvements in these areas are pivotal in achieving this target.
Despite its financial success, NNPC is currently facing challenges with fuel distribution, leading to fuel queues in Lagos and the Federal Capital Territory (FCT). Dapo Segun, Executive Vice President, of Downstream, has appealed for patience as the company collaborates with stakeholders to resolve the distribution and logistics issues. He assured the public that NNPC is working diligently to address the bottlenecks affecting fuel supply.
Subsidy Payments and Debt Obligations
NNPC’s profit declaration also comes against the backdrop of its N6.8 billion debt to international traders and ongoing discussions to borrow $2 billion. Additionally, the company has reportedly not remitted funds to the federation account since January 2023, as outlined by Section 64(c) of the PIA. This section mandates that NNPC must remit 70% of its crude oil sales to the federation account, retain 20% as earnings, and allocate 10% to the Frontier Basin Exploration Fund.
NNPC has explained to the federal government that its inability to pay taxes and royalties stems from its subsidy payments and foreign exchange differential challenges, which it refers to as a “subsidy shortfall/FX differential.”
The Bola Tinubu-led government has indicated that it plans to spend N6.8 trillion on fuel subsidies between August 2023 and December 2024, 17 months. To manage this financial burden, the government has approved that NNPC utilize its dividends to offset subsidy bills. This approach is part of the administration’s strategy to manage the economic impact of rising oil prices and Nigeria’s subsidy framework, which has strained public finances.
However, energy experts have noted that NNPC’s debt obligations, coupled with the government’s subsidy plans, create significant challenges that will require careful management. The continued implementation of reforms under the Petroleum Industry Act and improvements in crude oil production capacity have been touted as crucial in sustaining the company’s financial performance in the coming years.