Adetilewa Adebajo, Chief Executive Officer of CFG Advisory, has called for an urgent and comprehensive overhaul of the Nigerian National Petroleum Company Limited to address its significant financial and governance issues.
Adebajo, in an interview with ARISE NEWS on Wednesday, highlighted a critical need for restructuring within the NNPC, which he argues has been plagued by poor financial management and inadequate oversight.
Adebajo emphasised the importance of restructuring NNPC’s balance sheet and called for increased involvement from the Ministry of Finance Incorporated (MOFI) and the Central Bank of Nigeria (CBN).
According to him, MOFI, which holds the N200 billion in fully paid capital for NNPC, must play a pivotal role in improving the governance and financial management of the corporation.
He stressed that NNPC’s current approach to its balance sheet and operational funding is fundamentally flawed.
“We need to restructure the NNPC balance sheet. First of all, we need governance. The Ministry of Finance incorporated is the owner of the 200 billion fully and issued paid capital of that so we need to see a high level of governance, we need to see MOFI’s involvement in NNPC’s corporate governance. NNPC’s issue is a corporate governance issue.
“The issue of the balance sheet is that, if you take a look at the quick ratio of NNPC, the current liabilities exceed the current assets. So, they basically have liquidity issues despite saying they have 7 trillion in cash. So, there is that contradiction which could be quick. Ratios tell a different story, so the problem with the NNPC balance sheet is that they have not optimized debt or equity within their capital structure. What you are finding is that they cannot fund a lot of operations, so they are selling a lot of their crude forward which is wrong.”
Adebajo pointed out that the corporation’s quick ratios and debt-equity structure are misaligned, leading to its inability to fund operations effectively. This has forced NNPC to engage in excessive forward sales of crude oil, a strategy Adebajo criticised as flawed and unsustainable.
He questioned the approval process for these forward sales, suggesting that had it occurred in a private sector company, the CFO would likely have faced severe repercussions.
“Who gave the approval to get into N5 trillion worth of forward sales because if it is in any other company that CFO should have been fired, let the CFO of NNPC come here and explain its balance sheet, it’s a public document.”
He however said the problems are half solved because the NNPC has opened its books. “If we did not see the balance sheet, are we going to know how much is in the refineries, if we didn’t see it, we would have been speculating, so now we know let’s focus on the facts and ask the right questions.”
Furthermore, Adebajo advocated for the centralisation of NNPC’s financial transactions. He proposed that all proceeds from oil sales be deposited directly into an account with the Central Bank of Nigeria. This measure, he argues, is non-negotiable and crucial for ensuring transparency and proper governance. He also stressed the need for a high-level board committee to oversee the remuneration of NNPC staff as part of the broader governance reforms.
“Let the NNPC put up a board committee that will determine the remuneration of their staffs, that is part of governance. Let MOFI and the central bank of Nigeria take oversight of NNPC, any money made in oil sales should be put in CBN account. So, once they do that, you will know that this is a corporate finance play. We will restructure the balance sheet of NNPC, the fact is that you cannot continue to use forwards to finance your company so you refinance all those forwards and credit rating and issue a corporate bond in dollars.”
Adebajo also addressed the state of NNPC’s refineries, describing them as a financial burden. He suggested that the refineries, which have long amortization periods and are currently suboptimal, could be sold if they are brought to a satisfactory condition.
He highlighted that the refineries, along with other subsidiaries of NNPC, are contributing to significant financial losses, with losses amounting to about N25 trillion.
“Most of the money of NNPC on crude sales go into subsidies. We have seen that these other refineries are a burden on Nigeria and NNPC itself. Can you sell those refineries? of course you can sell them if you put them in order. If you take a look at amortization, the refineries are amortized for about 70 years so it still has a long-life span, so the question is that what is the state of disrepair of those refineries and how much is it going to cost to get it into operations so you need a technical expert to go in there?
“We know the problems with the other refineries, they are suboptimal and they are a drag on the NNPC balance sheet cause there’s zero revenue from refining, all of the NNPC subsidiaries are all loss making to the tune of 25 trillion naira.”
Adebajo further emphasised the urgency of restructuring NNPC’s financial practices, including refinancing forward sales, improving credit ratings, and issuing corporate bonds in foreign currencies. He called on MOFI and the CBN to take a more active role in overseeing NNPC’s financial and operational strategies to ensure that the corporation aligns with national interests and security.
Chioma Kalu
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