8 October 2021

Salient Statutory And Institutional Changes To The Nigerian National Petroleum Corporation Under The New Petroleum Industry Act 2021

S.P.A. Ajibade & Co.


S. P. A. Ajibade & Co. is a leading corporate and commercial law firm established in 1967. The firm provides cutting-edge services to both its local and multinational clients in the areas of Dispute Resolution, Corporate Finance & Capital Markets, Real Estate & Succession, Energy & Natural Resources, Intellectual Property, and Telecommunications.
The Nigerian National Petroleum Corporation ("NNPC") is required under the new Petroleum Act ("PIA") 2021 to change its structure to a ‘commercially viable' entity in the form of a limited liability company.
Nigeria Corporate/Commercial Law
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The Nigerian National Petroleum Corporation ("NNPC") is required under the new Petroleum Act ("PIA") 2021 to change its structure to a 'commercially viable' entity in the form of a limited liability company. Since inception in 1977, through the transformations or restructurings, NNPC has been a state-owned, and state-run corporation. Like a behemoth bestriding the energy sector of the Nigerian economy but reputed for failing to deliver the expected profits to the owner, statutory changes have now been made in the PIA 2021 setting out the criteria and structure of how the new Nigerian National Petroleum Company Limited ("NNPC Limited") will look and operate.

This short note will highlight some of the structural changes proposed for implementation in the PIA 2021. Judging from the vibes and decisions taken so far by the government since the President assented to the PIA 2021, it is heartening that government appears to be eager to implement the statutory and structural changes to the NNPC to make the NNPC Limited a world class company in the category of Saudi Aramco.

  1. Salient Structural and Institutional Changes.

The changes are generally provided for in sections 53-65 of the PIA 2021.

  1. Incorporation of NNPC Limited: The first and most significant of the changes is that NNPC, the corporation will become NNPC Limited, a limited liability company to be registered with the Corporate Affairs Commission ("CAC"). Section 53 (1) of the PIA 2021 makes express provisions for the Minister of Petroleum Resources to cause the NNPC Limited to be incorporated with the CAC within 6 months from commencement of the Act. In fact, within 6 weeks of the signing of the PIA into an Act, the incorporation of the NNPC Limited at CAC has been concluded.

By section 53 (2-5) of the PIA, the government of the Federation of Nigeria still holds full ownership of the NNPC Limited with the shares held by the duo of the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated on behalf of the government of the Federation. However, section 53 (5-8) evinces government's intention to set in motion the process of immediate commercialization and privatization of not only the operation of, but also a possible future private ownership of shares in the NNPC Limited. As nominated by the president, members of the board of NNPC Limited now incorporated are Senator Ifeanyi Ararume as the Chairman of the Board, Mele Kolo Kyari as Chief Executive Officer and Umar Ajiya Chief Financial Officer. Others Buhari appointed include "Tajudeen Umar (North East), Lami Ahmed (North Central), Mohammed Lawal (North West), Margaret Chuba Okadigbo from South East, Constance Harry Marshal also from the South South, and Pius Akinyelure (South West).

  1. Transfer of Assets and Liabilities: Section 54 of the PIA provides essentially that all assets and liabilities of the NNPC will be transferred to NNPC Limited. The Minister of Petroleum and the Minister of Finance are saddled with the responsibility of determining the assets, interests, and liabilities of the NNPC to be transferred within the 18 months of the PIA coming into effect. Subsection 2 states that any assets, interests, or liabilities not transferred shall remain that of the NNPC until extinguished or transferred to government. Six (6) months after the determination in section 54 (1), the Minister of Finance and AG Federation shall develop a framework for payment of liabilities not transferred to the NNPC Limited. If the determination and transfer is not done within the stipulated 18 months, the assets, interests and liabilities are deemed transferred to NNPC Limited. Subsection 3 provides that NNPC will cease to exist after the transfers. This is important as all partners, advisors and stakeholders of NNPC need to be fully aware of ramifications of that transition process and how to navigate same.

iii. NNPC Limited as agent of NNPC: By section 55 of the PIA, the NNPC Limited does not only replace the NNPC but also represents the latter's interests during the period of transition. Subsection 1 of section 55 provides that the Minister of Petroleum shall consult with his counterpart in the Ministry of Finance to appoint NNPC Limited as agent of the NNPC. The major job of the 'agent' is to wind down the assets, interests and liabilities of NNPC.

  1. All Guarantees against government and NNPC Subsist: Section 56 ensures that all effective guarantees are enforceable against government as they were under the previous structure subject only to section 93 (3) (a).1
  2. Transfer of Employees and Conditions of Service: Section 57 of the PIA provides for the wholesale transfer of the employees of the NNPC and its subsidiaries to the NNPC Limited with the same or similar conditions of service they hitherto enjoyed as such employees are deemed as employees of the new company. It is our hope that issues that may arise in this process will be properly handled to avoid labour and industrial faceoffs.
  3. Board of the NNPC Limited: By sections 58 and 59, there shall be a board of the NNPC Limited, whose members shall be appointed by the President. The board is to comprise of a Non-Executive Chairman, a Chief Executive Officer, a Chief Financial Officer, a representative each of the office of the Minister of Petroleum and Ministry of Finance not below the rank of a director. 6 non-executive members with at least 15 years cognate experience in the petroleum industry to represent each geo-political zone of the country. Subsection 5 of section 59 however, provides that when the NNPC Limited is no longer owned by government alone, then the shareholders will appoint the directors. Section 60 makes provisions for committees of the board to be created within 3 months of the incorporation of NNPC Limited. The board shall also develop a formal and transparent process for the creation of its committees and nomination of the members of the board of NNPC Limited to the committees. The committees are to be constituted in such a way to assure the highest corporate governance structure and practices. Now that the NNPC Limited is in place, the board will be expected to get to work immediately and in line with the PIA provisions.

vii. Corporate Governance and Annual Audit of NNPC Limited: Members of the Board of NNPC Limited shall discharge their responsibilities in accordance with the highest standards, practices and principles of corporate governance and shall ensure that its annual audit is conducted by an independent, competent, experienced, and qualified, auditor. See sections 61 and 62.

viii. Special Responsibilities of the NNPC Limited Board: Section 63 of the PIA provides for specific responsibilities aimed at enhancing the commercial operations and best governance structure of the NNPC Limited. This is in addition to the responsibilities listed under the Companies and Allied Matters Act 2020 and the section is to be inserted into the company's memorandum and articles. Strategic guidance in determining structure of business, approval of annual budget, due care and good faith, highest ethical standards in performing duties, corporate strategy and business risk analysis and planning, ensuring integrity of accounting system, communication and determining dividend policy are some of the duties of the board. The board has its work well cut out, and the expectations are high.

  1. Objectives and Business Practices: Section 64 lists the objectives of NNPC Limited while section 65 states the business practices to be adopted. The Fiscal Responsibility Act and the Public Procurement Act and the Treasury Single account shall not be applicable to the operations of the NNPC Limited. The company shall be vested as the concessionaire of all production Sharing Contracts, Profit Sharing and Risk Service Contracts as the National Oil Company on behalf of the Federation. The NNPC Limited shall adopt the Incorporated Joint Venture Company ("IJVC") model for its operating agreements with partners. The IJVC shall be an independent entity with strong commercial orientation and transparent operations as its focus. It is expected that the NNPC Limited will operate in the principles of good governance, transparency and will develop efficient, effective, and sustainable development of the petroleum industry for the benefit of Nigeria.
  2. Conclusion

Undoubtedly, the PIA proposes a paradigm shift from the old order in terms of structure, ownership, business method, and operational efficiency. The reform which has started holds a lot of promises which if well implemented could position NNPC Limited to rival the best of other national oil companies globally. We do hope that the swiftness shown so far in the implementation of the provisions of the PIA as relates to the NNPC Limited and other aspects of the reform will continue and politics or other factors will not be allowed to truncate or hinder things. Perhaps, with these reforms, the NNPC which has been mostly described as 'opaque' in the past can take its pride of place among corporate giants of repute not only in Nigeria but also in the global oil and gas industry.2


1. Section 93 of the PIA speaks generally to the relinquishment upon renewal or conversion of an oil mining lease.

2. See also our previous article on similar subject: "Behold the New Petroleum Industry Act, 2021"at and at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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