Adetilewa Adebajo, CEO of CFG Advisory, has called for an urgent and comprehensive rehabilitation of the Nigerian National Petroleum Company Limited to address its significant financial and governance problems.
In an interview with ARISE NEWS on Wednesday, Adebajo stressed the urgent need for restructuring within the NNPC, saying that the NNPC suffers from poor financial management and inadequate oversight.
Adebajo stressed the importance of restructuring the NNPC’s balance sheet and called for greater commitment from the Ministry of Finance Incorporated (MOFI) and the Central Bank of Nigeria (CBN).
According to him, the MOFI, which holds the NNPC’s N200 billion naira fully paid-up capital, must play a central role in improving corporate governance and financial management.
He stressed that the NNPC’s current approach to its balance sheet and operational financing had fundamental deficiencies.
“We need to restructure the balance sheet of the NNPC. First of all, we need governance. The Ministry of Finance owns the $200 billion fully paid-up capital, so we need a high level of governance, we need to see that the Ministry of Finance is involved in the corporate governance of the NNPC. The problem of the NNPC is a corporate governance problem.
“The problem with the balance sheet is that if you look at NNPC’s liquidity ratio, current liabilities exceed current assets. So they basically have liquidity problems even though they say they have 7 trillion in cash. So there is this contradiction that could be fast. Ratios tell a different story. So the problem with NNPC’s balance sheet is that they have not optimized their debt or their equity within their capital structure. What you find is that they cannot finance a lot of operations, so they sell a lot of their crude oil forward, which is wrong.”
Adebajo pointed out that the group’s liquidity ratios and debt structure were misaligned, resulting in the group being unable to effectively finance its operations. This had forced NNPC to engage in excessive forward sales of crude oil, a strategy that Adebajo criticised as flawed and unsustainable.
He questioned the approval process for these forward sales and said the CFO would likely have faced severe consequences if it had been a private sector company.
“Who gave the approval for forward sales worth 5 trillion naira? If the CFO of any other company should have been fired, then the CFO of NNPC should come here and explain the balance sheet. This is a public document.”
However, he said the problems were half solved because the NNPC had opened its books. “If we couldn’t see the balance sheet, would we know how much is in the refineries? If we didn’t see it, we would have had to speculate. Now that we know, we should focus on the facts and ask the right questions.”
Furthermore, Adebajo advocated for the centralization of the NNPC’s financial transactions. He proposed that all proceeds from oil sales be paid directly into an account at the Central Bank of Nigeria. This measure, he argues, is non-negotiable and crucial to ensuring transparency and proper corporate governance. He also stressed the need for a high-level board committee to oversee the remuneration of NNPC employees as part of the wider corporate governance reforms.
“Let the NNPC set up a board committee to determine the remuneration of its employees, that is part of corporate governance. Let the Ministry of Finance and the Central Bank of Nigeria take over the supervision of the NNPC, all proceeds from oil sales should be paid into the CBN account. Once they do that, you will know that this is a corporate finance game. We will restructure the balance sheet of the NNPC because you cannot finance your company with forwards anymore, so refinance all forwards and credit and issue a corporate bond in dollars.”
Adebajo also touched on the state of NNPC’s refineries, describing them as a financial burden. He suggested that the refineries, which have long payback periods and are currently not operating optimally, could be sold if they were brought to a satisfactory state.
He stressed that the refineries, together with other subsidiaries of NNPC, contribute to significant financial losses amounting to about N25 trillion naira.
“Most of the money that NNPC gets from crude oil sales goes to subsidies. We have seen that these other refineries are a burden on Nigeria and NNPC itself. Can you sell these refineries? Of course, you can sell them if you get them in order. If you look at the payback, the refineries are paid back to about 70 years, so they still have a long life. So the question is what condition are these refineries in and how much will it cost to get them back in operation? So you need a technical expert to look into that.
“We know the problems of the other refineries. They are not operating optimally and are putting a strain on the NNPC’s balance sheet as they are not generating any revenue from refining. All NNPC subsidiaries are making losses of 25 trillion naira.”
Adebajo also stressed the urgent need to restructure NNPC’s financial practices, including refinancing forward sales, improving creditworthiness and issuing corporate bonds in foreign currencies. He called on the Ministry of Finance and the CBN to play a more active role in monitoring NNPC’s financial and operational strategies to ensure that the corporation is in line with national interest and security.
Chioma Kalu
Follow us on:
