Introduction
On
It is also expected that NNPCL would eventually achieve trading status on global stock exchange markets like its counterparts, including
Yet, while the introduction of the NNPCL promises to be advantageous to the country's energy industry, realistically speaking, there are certain challenges that need to be promptly and properly addressed for the new NNPCL to function effectively and achieve its objectives. To mention a few, continued government influence, NNPC's transfer of liabilities to NNPCL, corporate governance issues are at the top of concerns.
Government influence concerns
Unlike its state-owned counterparts Saudi's Aramco and
Furthermore, the PIA incorporates an automatic transfer of all existing employees under the former NNPC into the new NNPCL with no vetting procedure for these employees in place. Section 57(1) under discuss states as follows:
Upon incorporation of
This means that NNPCL will have substantially the same employees as the former NNPC which is tantamount to pouring new wine into old wineskins. It is understandable that the lawmakers were wary of leaving the employees of the former NNPC redundant upon the transition. However, the automatic retention of former NNPC staff is counterproductive because NNPCL essentially inherits its all of its predecessor's employees, some of whom are controversially unqualified and redundant thereby stunting its growth potential.
The PIA goes further to provide for the appointment of a Board of the NNPCL whose appointment shall be done by the President of the country.7 Another interesting provision is Section 58(2)(r) which provides that the Board should among others consist of 'six (6) non-executive members with at least 15 years post-qualification cognate experience in petroleum or any other relevant sector of the economy, one from each geopolitical zone' effectively politicizing the appointment of these individuals to the board as opposed to appointments strictly based on merit. Perhaps realizing that the previous provisions on appointment to the new NNPCL Board may be inconsistent with the new NNPCLs 'no government influence' mandate, the lawmakers included a proviso in Section 58(5) stating that the provisions of the section would only apply where NNPCL remains wholly owned by the government after which the composition would then be determined by the new shareholders after the sale of shares to the public. This may appear to resolve the evident problem, however, the shares of the new NNPCL will not be made available to the public until an unknown time in the future which is not specifically stipulated under the Act.
Although NNPCL's Chief Executive Officer intimated that the company would be ready for an Initial Public Offering (IPO) mid 2023, this is not set in stone as factors such as governmental and bureaucratic delays in organization may extend this timeline. Afterall, it did take almost a year to fully effect the provision to incorporate the new NNPCL as opposed to the 6 months timeline stipulated in the PIA. In any case, even if there are no delays in the estimated timeline for the sale of shares to the public, the IPO process, appointment of new Board members and other corporate procedure could take months at the earliest to effect. This means that the NNPCL would still be run by old NNPC officials pending formalization of all corporate procedures thus making the new NNPCL 'government' run for at least the foreseeable future. Effectively, this results in NNPCL failing its first mandate as a fully commercialized company i.e to be free of government influence and control.
Transfer of liabilities
Another concern is the provision of the PIA which transfers liabilities from the old NNPC to the new NNPCL. This is provided for under Section 54(1):
the Minister of Petroleum and the Minister of Finance shall within 18 months of the effective date determine the assets, interests and liabilities of NNPC to be transferred to
Further provisions of the section discuss issues of assets that would remain with NNPC or the government, actions that may be brought against NNPCL, NNPC, or the government, etc. However, the mechanism for the determination of which assets and liabilities would pass on to NNPCL and which would be dealt with by the old NNPC/Government are not stipulated in the PIA, leaving much to the discretion of the Minister for Petroleum and Finance with some assistance from the Attorney General of the Federation in peculiar circumstances. Section 54(2) states as follows:
Assets, interests and liabilities of NNPC not transferred to
A spruce way to deal with the inherited assets and liabilities from NNPC would have been to make provision for the creation of an SPV to specifically deal with these issues, especially with respect to the liabilities rather than burden the NNPCL with the old NNPC's mammoth liabilities in its formative years when it should be focused on its growth. It is hoped that the Ministers would devise suitable mechanisms to deal with these in the most efficient and least invasive way possible.
Corporate Governance considerations
As a corporate entity, NNPCL will be governed by
Some of the corporate governance sections under CAMA include provisions which state that every public company must have at least three (3) independent directors appointed in line with the required qualifications stipulated;9 Directors may not serve on the board of more than five (5) public companies at a time; disqualified directors now include directors that were removed from the Board;10 and attendance of Board meetings is now a factor for re-election.11 On its disclosure obligations, NNPCL is expected to ensure that information on the Memorandum and Articles of Association of the company is accessible to the public and potential investors. The shareholding structure12, shareholders13, authorized share capital, exact date of incorporation e.t.c all need to be fully disclosed to the public to ensure compliance with the provisions of the PIA and CAMA. Records of the minutes of the meeting where the first directors are appointed, board resolutions for the nomination of the Chairman e.t.c all need to be public knowledge to ensure complete transparency and fulfil all international best practice disclosure obligations.
Worthy of note is Section 60-63 of the PIA which attempts to cater for some corporate governance concerns of the new NNPCL. However, the provisions seem to be merely advisory and no liabilities are imposed for any failure to carry out such responsibilities. Thus, recourse is to be had to CAMA and its regulatory body, the
Conclusion
On the whole and having considered some salient issues with respect to the new NNPCL, there are some who believe that the transformation of the NNPC into NNPCL is merely a name change and that there would be no material difference from the old structure especially as the NNPC has operated as a highly institutionalized corporation for the last 45 years. Whether they are right or wrong, only time will tell.
However, it is important to remain optimistic that with the right corporate administration, NNPCL can create an environment that would not only grow the country's economy but also attract both local and foreign investment thereby making it a major player in the global energy market.
Originally published
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