On 19 July 2022, the President unveiled the Nigerian National Petroleum Company Limited (NNPC Ltd); the new limited liability company which has replaced the former Nigeria National Petroleum Corporation (NNPC), the national oil corporation of the Federal Republic of Nigeria.
NNPC Ltd was incorporated in September 2021 further to the Petroleum Industry Act 2021 (the PIA) which provides for the incorporation by the Minister of Petroleum Resources of a limited liability company under the Companies and Allied Matters Act (the CAMA) to take ownership of the operations of the NNPC.
Purpose and Implications of NNPC Ltd
NNPC Ltd is part of the overarching objective of the Federal Government to commercialise and ultimately privatise its national oil company and achieve a private commercial venture which is self-sufficient and operates in accordance with commercial business principles. NNPC Ltd will be subject to the provisions of the CAMA as other companies incorporated in Nigeria.
In line with the provisions of the PIA, NNPC Ltd will hold and be responsible for all interests and liabilities of the NNPC, including actions or proceedings brought by or against the NNPC prior to the date of transfer of its assets to NNPC Limited. As a private commercial entity, NNPC Limited will not be subject to institutional oversights such as the Treasury Single Account, Public Procurement Act and Fiscal Responsibility Act; which regulate the funds, budgets and expenditure of public and statutory institutions in Nigeria. NNPC Ltd is however expected to conduct its business and operations in in accordance with applicable Nigerian laws and global best practices.
NNPC Ltd as a commercial venture will also be required to pay its shares of fees, rents, royalties, taxes, etc., to the Federal Government or relevant statutory agencies for the collection of statutory payments, fees royalties etc arising from its operations.
The shares of NNPC Ltd are held by the Ministry of Finance Incorporated and Ministry of Petroleum Incorporated in equal portions, on behalf of the Federal Government. Thus, NNPC Limited's shares are fully Federal Government owned until private investors acquire shares in NNPC Limited.
The PIA places a restriction on the transfer of the shares in NNPC Ltd which are subject to the approval of the Federal Government and the National Economic Council prior to a transfer including a transfer by way of sale, assignment, mortgage or pledge.
NNPC Ltd is a laudable achievement and game-changing for the Nigerian oil and gas sector. There may be concerns that the government holding shares for an extended period or retaining majority equity and approval/veto rights over share transfers may result in undue delays in commercial transactions which NNPC Ltd will need to undertake for its business and financing arrangements. The risk of political interference will also need to be mitigated to give investors confidence to invest.
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