The Nigerian National Petroleum Company Limited (NNPCL) has reported a notable 37.2% increase in its revenue, showcasing a robust financial performance in its latest Audited Financial Statement (AFS) for the year 2022.
This marks a crucial milestone for the state-owned oil corporation, whose financial reports have been under the shadows for years.
The released AFS for 2022 reveals a substantial surge in revenue, climbing from N6.42 trillion in 2021 to an impressive N8.81 trillion. This considerable growth underscores a shift in the management of the NNPC.
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Profit After Tax (PAT) has also seen an extraordinary surge, recording N2.52 trillion in 2022. This represents a remarkable 274% increase compared to the N674 billion reported in the previous year. Such substantial profit growth underlines the NNPC’s ability to navigate challenges effectively and capitalize on market opportunities.
Examining the financial metrics in detail, the AFS discloses a robust asset base for the NNPC. Total non-current assets stand at N37 trillion, complemented by current assets of N21.59 trillion, culminating in a total asset valuation of N58.65 trillion. This represents an outstanding increase of 260.47% compared to the figures reported in 2021.
However, accompanying this growth are non-current liabilities of N19.98 trillion and current liabilities of N29.3 trillion, resulting in a total liability of N49.35 trillion. This demonstrates a substantial increase of approximately 266.6%.
One significant aspect of the NNPC’s financial health is the positive trend in profits over the past few years. Reflecting on historical data, the corporation recorded a loss of N803 billion in 2018. However, subsequent years witnessed a commendable turnaround. The NNPC reported a profit of N287 billion in 2020 and N674.1 billion in 2021, laying the foundation for the impressive financial performance witnessed in 2022.
The auditors, in their notes to the 2022 AFS, expressed confidence in the NNPC’s financial stability, stating, “The financial statements have been prepared in accordance with the going concern principle under the historical cost convention. Nothing has come to the attention of the directors to indicate that NNPC will not remain a going concern for at least 12 months from the date of these financial statements.”
The governance reforms in the oil and gas sector, particularly the enactment of the Petroleum Industry Act (PIA) in 2021, played a pivotal role in reshaping the NNPC’s structure and operations. Under the PIA, the NNPC officially transitioned from a state-run oil corporation to a commercial venture in July 2022. Despite this transformation, the federal government still maintains a considerable level of control over the NNPC.
The NNPC’s remarkable financial trajectory is further highlighted by its cost of sales, which escalated to N6.7 trillion in 2022, indicating a 25.47% increase from N5.34 trillion in the previous year. This increase reflects the corporation’s commitment to operational excellence and efficiency.
In addition to its financial performance, the NNPC’s AFS provides insights into its investment strategy. Notably, the report outlines the repayment plan for the NNPC’s 20% stake in the Dangote refinery.
“In September 2021, the NNPC acquired a 20 percent interest in Dangote Petroleum Refinery and Petrochemicals Free Zone Enterprise (DPRP FZE) worth $2.76 billion. This investment is held by NNPC Greenfield (a special-purpose vehicle that is 100 percent owned by NNPC) in trust for NNPC.
“This acquisition was financed by a $1.036 billion funding of which $1 billion was paid to Dangote Refinery and $36 million accounting for transaction costs.
“The balance of the cost of equity investments made in DPRP FZE, which is $1.76 billion will be paid upon completion of the refinery project starting April 1, 2023 or any other date agreed between the parties, that is the NNPC and Dangote Oil Refining Company Limited,” the report said.
According to the report, once the refinery comes into operation, the NNPC will initiate a discounting mechanism, offering a $2.5 discount for every barrel from the supply of 300,000 barrels per day. This discount will be utilized to offset the remaining equity participation.
Furthermore, the NNPC has entered into a forward sale agreement with Lekki Refinery Funding Limited to supply 35,000 barrels of crude oil per day. This arrangement aims to facilitate the repayment of the $1.036 billion funding already received for the investment in the Dangote refinery.
The NNPC’s financial success is also evident in its forward-looking initiatives, such as the 90,000 bpd oil-for-debt financing deal of $3.3 billion with Afreximbank. These strategic engagements are said to contribute to the company’s overall financial resilience, strengthening its position in the energy sector.
Like its counterpart Saudi Aramco, the NNPCL is expected to drive economic growth and revenue stability in the country through financial prowess.
Experts believe that the positive trajectory in revenue and profits, coupled with strategic investment initiatives, will change the unpleasant financial story of the NNPC if sustained.