The Nigerian National Petroleum Company (NNPC) recently announced a historic profit after tax of N2.5 trillion for the year 2022, marking a staggering 279 percent increase from the previous year. However, the revelation has left some stakeholders unimpressed, raising concerns about the company’s performance in the context of its international counterparts.
Waziri Adio, the executive director of Agora Policy, expressed disappointment in NNPC’s performance. In comparison to its peers, Adio argued that NNPC is still underperforming both in absolute terms and relative to other national oil companies.
Data collected by BusinessDay indicates that NNPC recorded an operating profit of N694.29 billion ($1.61 billion), total revenue of N8.82 trillion (N20.44 billion), and total assets of N58.65 trillion ($136 billion) in 2022. This resulted in an operating margin of 7.8 percent and an asset turnover ratio of 14.7 percent.
Adio highlighted, “Both indicators show that NNPC Ltd was financially not in fine fettle.”
Comparing NNPC to its peer, Petronas, the state-owned oil company of Malaysia, reveals stark differences. Petronas recorded an operating profit of $31 billion, revenue of $75 billion, and assets of $162 billion during the same period. The Malaysian company achieved an operating margin of 40.89 percent and an asset turnover ratio of 46.29 percent.
Similarly, Qatar Energy reported an operating profit of $26.7 billion, revenue of $53.8 billion, and total assets of $162 billion. With a 49.63 percent operating margin and an asset turnover ratio of 33.20 percent, Qatar Energy demonstrated a robust financial performance.
Adio pointed out, “In sum, these national oil companies are surely sweating their assets. Not NNPC Ltd.”
Another major concern raised by analysts is the belief that NNPC is not optimizing its oil reserves effectively. Despite Nigeria being Africa’s largest oil producer with reserves standing at 37 billion barrels, the company produced an average of 1.5 million barrels daily last year. This contrasts sharply with PEMEX, the Mexican national oil company, which produces 2.45 million barrels per day from proven reserves of 7.4 billion barrels.
Adio emphasized the issue, stating, “NNPC Ltd has reserves twice or thrice that some of its comparators but is deriving entitlements less than a quarter of theirs. NNPCL is not maximizing its reserves, which negatively impacts its revenue and assets.”
Furthermore, 51 percent of NNPC’s revenue in 2022 came from the sale of petroleum products, a low-margin business that raises questions about the company’s strategic focus.
In comparison to local producers like Aradel and Seplat, NNPC’s performance is deemed lacking, even though it insists on the right of first refusal in any divestment deals. Its subsidiary, NNPC Exploration & Production Limited, possesses numerous oil and gas blocks, yet 70 percent of its fields remain dormant.
The announcement of NNPC’s profit has ignited discussions about the need for the company to address these performance gaps and optimize its resources for a more competitive standing in the global oil and gas sector.