The new National Petroleum Company (NPC) to be established under the Petroleum Industry Governance Bill (PIGB) will retain some of the revenues earned from crude oil and gas sales, TheCable Petrobarometer can report.
Under the current system, all revenues earned by the Nigerian National Petroleum Corporation (NNPC) are expected to be swept into the federation account, from where they are shared by the three tiers of government through the Federation Account Allocation Committee (FAAC).
The NPC will be the successor company to the NNPC when the bill is signed into law by President Muhammadu Buhari.
However, according to harmonised version of the PIGB seen by TheCable Petrobarometer, the NPC will be entitled to “retain its revenue from its operations and shall be entitled to defray from such revenue all its expenses including its cash call obligations in respect of joint venture assets and its petroleum operations and its obligations to lenders and financiers”.
The proposed company is envisaged to be a profit-making, commercial enterprise, able to source for the funding of its operations from local and foreign credit agencies.
The NPC, on its take-off, will have an initial shareholding of 20% by the Bureau of Public Enterprises (BPE), 40% by the Ministry of Finance Incorporated and 40% by the Ministry of Petroleum Incorporated on behalf of the federal government.
The government agencies are required to divest up to 30% of the shares within 10 years of the NPC coming into existence to the public, making it a public/private enterprise.
Oil industry officials and legal experts explained that since the NPC is expected to be self-financing — unlike the NNPC that currently depends on the government — the former is expected to utilise the money earned from its operations to run the business.
“What that means is you would be clear that NPC is a profit centre. So it runs the business, retains some of the profit it makes, so that it can invest it into other parts of the business. It doesn’t just send out all of its profits or all of its earnings into the federation account. It would retain to run the business,” Adeoye Adefulu, partner at Odunjirin & Adefulu, a commercial law firm, told TheCable Petrobarometer.
The 36 states of the federation are regularly at loggerheads with the NNPC over the persistent shortfall in oil revenues deposited into the federation account by the corporation, whenever they hold the monthly FAAC to distribute revenues.
NNPC, on the other hand, had linked the shortfall to the need to meet its operations costs, especially fuel importation.
Data released on Monday by the NNPC showed that it made N367.7 billion in January this year alone, incurring N317.6 billion expenses or a surplus of N50.096 billion.
The new NPC will, however, be expected to deposit into the federation account, dividends accrued in respect of the shares held on behalf of the federal government.
This will be similar to what is currently obtainable in the Nigeria LNG Ltd., where dividend accruing to the government from its 49% equity in the Bonny LNG plant is deposited into the federal account.