By Bassey Udo
The numbers from the 2024 annual financial report published recently stack up consistently to the reality of the behemoth the new Nigerian National Petroleum Company (NNPC) Limited is being built into, to lead Africa’s oil and gas industry competition to the world. In its over 48 years of existence, never has its performance left so much to cheer, giving Nigerians reason to hope for a brighter future.
Since its inception in 1977, the NNPC was run as government business that was nobody’s business. The result was decades of losses that left the company barely existing, without the capacity to venture beyond its immediate shores to compete for stakes in global oil and gas arena.
Laying the foundation for sustainable profit
But, in 2019, something fundamental shifted when Mele Kolo Kyari assumed office as Group Managing Director of the company. Once notorious for being the poster boy of rot, opacity and corruption among public institutions in the country, NNPC began to embrace the global best practices in its operations.
Apart from becoming one of the Extractive Industries Transparency Initiative (EITI) Special Partner company that imbibed the principle of transparency and accountability, the NNPC began to open up, by publishing its audited financial statement in its over 42 years history then.
It was the first time the company was displaying the change it had imbibed with its affiliation with the global transparency group in its operations.
The publication of the audited account revealed the extent of the decay in the system, as the company reported a loss of over N803 billion at the end of the 2018 financial year.
As Kyari settled down effectively for business, his immediate challenge was how to dismantle the negativities that characterised the operations of the NNPC and set up a structure that would lay the foundation to entrench transparency, accountability, resilience, and sustainable growth in the company.
Through a rare ingenious management recalibration of the company operational processes, NNPC was able to cut down its loss level to about N1.7billion within one year at the end of the 2019 financial year.
Breaking from losses to profitability
By 2020, the company managed to cross the loss threshold to profitability, with the financial report for the year showing a historic profit after tax result of over N287billion, the very first time in its history the company was recording profit.
Since then, the company’s financial trajectory has been on the upswing, with a profit after tax of about ₦674.1 billion at the end of the 2021 financial year, and about ₦2.548 trillion in the 2022 financial year, more than double the profit realised in the previous year.
The performance was even better in 2023, with a ₦3.297 trillion profit after tax reported in the year’s financial statement, setting the stage for an unprecedented ₦5.4 trillion profits announced during recently released 2024 annual financial report.
The figure represents a princely 64 percent increase from the previous year’s profit, apart from a ₦27.07 earnings per share pay out to investors, about 64 percent year-on-year growth.
Performance details
Details of the year’s performance as recorded in the published Consolidated and Separate Statements of Profit and Loss Account for the Group and Company showed almost double their capacity on all operational indicators.
In terms of revenue realised from contracts with its customers, the NNPC Group recorded about N45.075 trillion during the year under review, from about N23.990trillion recorded in 2023, while the Company’s revenue from contracts with its customers in 2024 was about N19.565trillion, more than double the corresponding figure of N8.131trillion for 2023.
Revenues from contracts with customers came mainly from crude oil sales, refined petroleum products supply, natural gas, sale of power to the Nigerian Bulk Electricity Trading (NBET) and other services relating to seismic contracts, gas transmission tariffs, shipping, marine and engineering activities.
Despite an increase in the Group’s cost of sales, from N16.95trillion in 2023 to N33.362trillion in 2024, gross profits of about N11.713trillion was reported in 2024, against N7.039trillion in 2023.
Similarly, despite an elevated cost of sales of about N12.277trillion by the Company in 2024, from N3.986 trillion in 2023, the Company’s profit jumped to about N7.378trillion in 2024, from N4.144 trillion in 2023.
After factoring in selling, distribution, general and administrative costs as well as net impairment charge, other income, gains and losses, the Group realised and operating profit of N10.837trillion for 2024, compared to N6.302trillion in 2023, while the Company realised N10.316trillion, from N4.311trillion in 2023.
After deducting finance costs and income as well share of net profit or loss for associates and joint ventures, the profit before tax for the Group came to about N9.558trillion in 2024, from N5.988trillion in 2023, against N9.447trillion by the Company in 2024, from N4.041trillion in 2023.
A further deduction of N4.143trillion as income tax charge from the Group’s profit before tax leaves a profit after tax of N5.414trillion that was declared during the presentation of the 2024 financial statement, which is higher than the N3.297trillion that was realised in 2023.
On the other hand, the Company realised about N5.923trillion as profit after an income tax charge of N3.524trillion was deducted from the initial profit before tax, while profit after tax for 2024 was more than double the N2.219trillion recorded in 2023.
Turnaround from negative bottom line to consistent profit
The Group Chief Executive Officer, Bayo Ojulari, attributes the turnaround from the era of serious negative bottom line to consistent profit recorded the Group and Company five to six years ago to its management’s ability to achieve operational efficiency and productivity through the implementation of rigorous, but disciplined cost-optimization measures deployed across the whole spectrum of their operations, from the upstream through the midstream to the downstream sectors.
This strategy, he said, enabled the company to transform into a commercially focused and efficiently run entity, delivering on its primary mandate of producing oil and gas, as well as marketing, distributing and supplying petroleum products more efficiently, reducing waste, and deriving increased value addition to the Nigerian economy.
Besides, he said the NNPC has been able to achieve increased production capacity and enhanced revenue yield, as a result of improved uptime and performance from its assets, while significantly reducing the incidences of crude oil theft and pipeline vandalism, thereby boosting the volumes of crude oil reaching the export terminals.
Also, Ojulari noted the impact of the reforms on the entire petroleum industry through the enactment of the Petroleum Industry Act (PIA) 2021, which positively impacted its operations, particularly the downstream sector, where the introduction of the deregulation policy allowed for a more market-reflective pricing structure that guaranteed profits.
This, he said, significantly reduced the heavy burden of payment of subsidies on the supply of petroleum products, which, for several years, served as drain pipe for the company’s lean financial resources.
Apart from unlocking value for the system, he said the deregulation of the downstream sector of the petroleum industry enabled NNPC’s operations in the sector to contribute massively to the Group and Company’s bottom line in the past few years.
Sustaining the trajectory of growth
With the significant level of profitability so far, Ojulari said the NNPC is determined to maintain a trajectory of sustainable and resilient profitability by building on the solid foundations inherited from his predecessor.
Prior to his coming to office, the management of NNPC under Kyari, despite pressures as a result of the global energy transition agenda, drastically transformed the company into a regional superpower in 2023, with an asset base valued at almost N250 billion, focused on developing critical assets to boost its value addition capacity and guarantee energy security for the country.
At the time, NNPC’s aspiration was to grow the country’s daily crude oil production capacity from less than one million barrels then to an average of 1.8million barrels, with the target of two million barrels before the end of 2024.
Also, Kyari was committed to delivering some strategic projects initiated to help harness the natural gas produced in the oil fields in the Niger Delta region and transported through the Ajaokuta-Kaduna-Kano (AKK) gas pipeline to industrial establishments in the northern part of the country.
He said critical national projects like the Ajaokuta-Kaduna-Kano (AKK), Escravos-Lagos Pipeline System (ELPS) and Obiafu-Obrikom-Oben (OB3) Link Line to strengthen domestic supply and regional integration are not just pipelines, but national arteries that will fuel Nigeria’s industrial revolution, power homes and industries, as well as create a vibrant gas-based economy that will unlock billions of dollars in investment, create millions of jobs, and provide a stable, low-carbon energy source for generations.
These projects, alongside NNPC’s refineries rehabilitation efforts, the NNPC GCEO said, are fundamental to the company’s long-term strategy, as they will diversify its revenue streams, enhance its safeguarding of Nigeria’s energy security, and firmly establish the Company not just as an African energy champion, but as a competitive and resilient global energy company.
To ensure the optimal operation of the country’s refineries, he said the technical and commercial viability of facilities are being reviewed to strengthen domestic energy security, while pursuing a $60 billion investment pipeline to expand oil and gas output.
With the NNPC currently moving from a culture of mere ownership of assets to being a commercially-driven and result-oriented active, strategic asset manager, the focus is on the company making efforts to maximize uptime in its operations, by improving the reliability and availability of its key production and refining assets.
Similarly, he said the company will strive to achieve commercial optimization, by ensuring that every asset, from pipelines to storage depots, is run with a clear commercial focus, contributing to revenue and profits to the company.
To unlock value from under-utilized assets, to allow them contribute to NNPC’s overall bottom line, Ojulari said the company will adopt strategic divestment of some of the assets, and where necessary, go into partnership with interested investors with the right capital and technology, to help build their capacity.
As part of efforts to ensure sustainability, Ojulari said recently that the NNPC under his leadership is transitioning from a period of recovery to a phase of structured growth.
Ploughing back profit for growth
With the profit realised from its operations, the company is determined to rigorously plough it back into investments in high-return projects, like gas and renewable energy expansion initiatives as well as low-carbon energy portfolio facilities that the company is currently developing aggressively, to generate future cash flows to the company.
Besides, Ojulari has assured of his management’s commitment to sustain the company’s culture of operational excellence, in terms of discipline in cost allocation and efficiency drives, which are now embedded in NNPC’s operational DNA.
On plans to increase the country’s crude oil production capacity to about two million barrels per day by 2027 and three million barrels per day by 2030, he said the recent presidential directive for the NNPC to attract up to $30billion sectoral investments as well as increase the country’s crude oil production capacity would serve as catalyst and a strategic compass to continue to guide the substantial progress the company has made so far.
Beyond increased oil production capacity, the company’s plans to grow its natural gas production capacity to about 10 billion cubic feet per day by 2027 and 12 billion cubic feet per day by 2030 are on course, with investments in well-workovers and technology to boost output from existing fields; security of oil production facilities in collaboration with government agencies and communities, which, he said, has reduced operational downtime.
Apart from deepening its drive to entrench transparency in its system to build global investor confidence to attract investment to the country, the NNPC Chief said the company has a robust pipeline of bankable projects it is determined to pursue in the years ahead.
In addition, he said the NNPC is partnering with both the international oil companies and indigenous players to dismantle all bottlenecks to its operations, while accelerating the approval of new projects.
“We are positioning NNPC Limited as a globally competitive energy company capable of delivering sustainable returns, while powering the future of Nigeria and Africa to play at the global arena,” he said.
