Nigeria is one of the largest oil producers in the world. Its oil production is essentially controlled by a corporation known to be the Nigerian National Petroleum Corporation (NNPC). The NNPC was a government-owned corporation that became a privately-owned corporation in July 2022. It is the only entity licensed to operate in the country’s oil industry. The NNPC is responsible for harnessing Nigeria’s oil and gas reserves for sustainable national development. It explores, produces, refines oil, and markets and retails petroleum products. Moreover, it is also involved in petrochemicals and gas development, oil and gas engineering, the supervision of government investments in the upstream sector, and the marketing of Nigeria’s accruable crude.
The NNPC was established in April 1977 as a merger of the Nigerian National Oil Corporation and the Federal Ministry of Petroleum and Energy. The former state-owned company, known for its relatively poor leadership and lack of profits for some 45 years, has become a privately-owned corporation; independent of government and operates without state funding, with the new goal of delivering value to its shareholders. Since the NNPC became a private corporation, Nigerian businessmen and industrialists Aliko Dangote and Tony Elumelu have both expressed confidence in the NNPC to become the largest oil and energy of the African continent. Indeed, Dangote said that considering the massive opportunities at its disposal,, the company has what it takes to be “Africa Aramco,” because anything is possible. Meanwhile, Elumelu said he is a beneficiary of the NNPC. He extolled the remarkable growth achieved by the company and its impact on the Nigerian economy. He also praised the company for delivering Heirs Holding Oil and Gas Limited from a 97% loss of crude oil per day to a 96% recovery in crude oil production.
Prior to becoming a private corporation, the NNPC was indicted by the Nigerian Senate for poor record-keeping for crude oil deliveries to Warri Refinery and Petrochemical Company and Kaduna Refinery and Petrochemical Company worth $376.65 million. The indictment stemmed from the 2016 Auditor General report submitted and presented by Senator Mathew Uhroghide, which was upheld by the Senate Chamber during the plenary session.
When the NNPC was state-owned, Nigerians complained about the need for reform in the oil and gas sector. They wanted a new NNPC that would be organized for productivity and efficiency and not a mere government parastatal bogged down by politics and graft. Under government control, the NNPC was a cash cow for the Nigerian government, as a dependent public sector agency. It managed the oil and gas resources of the country, makes money, then transmitted that money to the treasury. Every month, state governments carried bowls in their hands, rushing to Abuja to collect their own share of the national cake. For months, the NNPC using the excuse of under-recovery and subsidy has not been able to contribute as much as it should to the national purse.
Under state ownership, the corporation was not driven by making profits but by expanding its political power over the oil and gas industry. The fundamental point is that a private entity is after the maximization of profit and the minimization of cost. Since it become privately owned, its crude oil production surged considerably. Prior to becoming a private company, the corporation was losing about 21 million barrels per month and up to $1.9 billion every 30 days. The privatization of the company has not only expanded its commercialization but it has drastically increased its efficiency and productive capacities. Since January 2023, the corporation increased its production from 900,000 barrels per day (bpd) to about 1.60 million bpd.
Nigeria remains an essential pioneer in the production of crude oil on an international scale. The privatization of the NNPC is perhaps one of the best decisions made to not only increase its oil production but to also boost the Nigerian economy as a whole.