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NNPC posts $2.8b profit for 16 months to 2022

The Nigerian National Petroleum Co. Ltd. (NNPC) has reported N2.5 trillion ($2.8 billion) in income for the 16-month period to December 2022, saying policy reforms have turned around the country’s oil fortunes after decades of losses for the national oil and gas company.

NNPC collected N8.8 trillion ($9.8 billion) in revenue for the period, while it owed N344 billion ($381.6 million) in income tax, according to a financial report on its website.

While it has not released earnings for last year, it said 2023 presented a “pivotal chapter”, hailing the end of a costly fuel subsidy program that year as setting the stage for sustained profitability. In his inaugural address last May, President Bola Ahmed Tinubu announced an end to the country’s fuel subsidy as part of efforts to lighten financial burdens on the government.

“Freed from the bureaucratic entanglements by the implementation of the Petroleum Industry Act it [NNPC] embarked on a journey of financial prosperity,” the Abuja-based NNPC said separately in an earlier report on its YouTube channel reviewing 2023. Adopted 2021 to replace the Petroleum Act, the new legislation provides for energy infrastructure financing support, a simplified hydrocarbon tax and energy investment promotion.

“The foundations for this success lay in sound policies, a streamlined cost structure and the infusion of automation into financial processes”, it explained. “This combination of factors fostered operational efficiency, cost containment and optimization, paving the way for unprecedented profitability from the depth of a staggering loss of N800 billion [$887.4 million] in 2018 to a N1.7 billion [$1.9 million] setback in 2019.

It was in 2020 that the company became profitable for the first time since its establishment in 1977, according to NNPC.

“The lingering constraint of fuel subsidy payments hampered its growth potential until a new administration emerged bringing an end to the subsidy regime, saving the company from bankruptcy and setting it on a path of financial prosperity,” NNPC added.

The subsidy removal has saved the state N400 billion ($443.7 million) monthly on average, according to chief financial officer Umar Ajiya. “[T]he totality of the entitlements of tax and royalties and profits… were all going into subsidy and that's why we reached a position in 2022 [where] we literally remitted zero to the federation account,” he said in the video report.

After the new head of state’s decision to stop subsidy payments, NNPC managed to start paying dividends to the state, Ajiya said, adding, “On top of that we are also paying our due obligations in terms of taxes and royalties and all other government tax”.

NNPC contributed N4.5 trillion ($5 billion) to state coffers in the first nine months of 2023, the video report said.

For the next five years, Nigeria has set a target of over $50 billion worth of oil development projects, the country’s hydrocarbon regulator said last year. The projects were outlined at the Nigerian Oil and Gas Opportunity Fair in May, which saw participation from international companies including Shell PLC, organizer the Nigerian Content Development and Monitoring Board (NCDMB) said in a news release at the time.

In September, the government signed a deal with oil majors designed to cut the duration of the awarding process for petroleum development projects to six months for existing production-sharing contracts (PSCs).

The pact, a memorandum of understanding that also serves as a so-called service-level agreement, has "the goal of quickly ramping up Nigeria’s flagging crude oil production, ensuring compliance with the provisions of the Nigerian Content Act, and timely approvals of documents," the NCDMB said in a statement then, referring to a law regulating oil and gas development projects. Besides the board, the other signatories included NNPC, Nigerian Agip Oil Co. Ltd. and subsidiaries of Chevron Corp., Shell, Exxon Mobil Corp. and TotalEnergies SE. The NNPC is the concessionaire of the PSCs held by the multinationals.

“As the horizon of 2024 unfolds NNPC Limited is poised to deliver substantial value to its shareholders, attract new investments and solidify its position as an entity that is open for business,” the company declared in the video report reviewing performance in 2023.