8 July 2019

Nigeria: Tasks Before Kyari, New NNPC GMD

Photo: NNPC/Twitter
Mele Kyari.

Obinna Chima and Chineme Okafor write on expectations from stakeholders as Mallam Mele Kyari takes over as the Group Managing Director of the Nigerian National Petroleum Corporation

The new Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, will officially assume his position today.

Kyari, would be superintending a national oil company in a very challenging time and conditions.

But, to a lot of operators and industry stakeholders, the new NNPC boss, who had been described as a professional, is expected to steer the corporation to its next level of growth.

In fact, some operators have urged the new NNPC boss to introduce reforms that would deregulate the sector and resolve the problems of the refineries. Also, some stressed the need for him to work with the executives to end the controversial fuel subsidy regime as well as pass the Petroleum Industry Governance Bill (PIGB).

Kyari, replaced Maikanti Baru who retired this month. The new Group Managing Director of the NNPC, hails from Borno state. Kyari, a Geophysicist, is an expert in crude oil marketing and currently Nigeria's Representative at the Organisation of Petroleum Exporting Countries (OPEC) where he provides leadership and participates in engagements relating to Crude oil, Gas production and associated market issues.

Kyari is considered by many at the NNPC towers as a model servant leader whose actions inspire, serve, and empower others to produce the best. He is credited with the transformation of the management of the complex crude oil marketing of the nation's crude oil through the establishment of world class systems and processes.

The new NNPC boss, who shares same surname with President Buhari's Chief of Staff is not related to Abba Kyari. He led a team that proposed and managed the Direct Sales and Direct Purchase (DSDP) arrangement of Petroleum products from 2016 to date a process that saved the nation $1 million in 2016 when compared with the previous crude SWAP arrangement with products.

He also led various work teams in developing the Petroleum Industry Bill which ensured that Government's take in the Production Sharing Contract Arrangement is greatly enhanced, and contributed immensely in resolving the disputes with International Oil Companies (IOCs) arising from the various interpretation issues with the PSCs averting claims of $9 billion dollars filed by the IOCs.

Aside his vast experience in the management of both Upstream and Downstream activities, he is said to possess a "a rare ability" in commercial decision making and his equally outstanding in his ability to manage International Oil Companies (IOCs), which had all been demonstrated in the course of his over 28 years' illustrious career in the oil and gas sector.

He started his carrier as a Field Geologist with the Department of Geological Survey of Nigeria. He joined NNPC in 1991 as a Processing Geophysicist with Integrated Data Services Limited (IDSL). In 1998 he was deployed to National Petroleum Investment Management Services (NAPIMS) and worked as an Exploration Geophysicist. In 2007, Mr. Kyari was given the role to head Production Sharing Contracts Management in Crude Oil Marketing Division (COMD).

While in COMD, he displayed exceptional management qualities that led to his appointment in 2014 as General Manager, Crude Oil Stock Management and in 2015 he became Group General Manager, COMD, a position he held till date.

He is also a unionist, and many have cited his activism as a trade unionist as likely reason why he is an advocate for transparency. He is fondly called by other unionists as "grand chairman."

Kyari was born on the 8th of January 1965 in Maiduguri, Borno State. He attended Government Community Secondary School Biu in Borno State between 1977 to 1982. He graduated from University of Maiduguri in 1987 with a Bachelor of Science in Geology.

He was NNPC's former General Manager, Crude Oil Stock Management, 2014-2015. Kyari has also participated in various deepwater projects across the globe.

He is the 19th Group Managing Director of the national oil company.

Task Before New NNPC GMD

Putting a context to what Kyari is to deal with, in April 2019, the Revenue Watch Institute (RWI) had categorised the NNPC in its publication of National Oil Company Database, as one of those National Oil Companies (NOCs) with record challenges of transparency.

It noted that the corporation amongst others hardly disclosed to the public its net income from core revenues; capital and operational expenditures; cash flows from operations; total assets worth; and even employees statistics.

To drive home its point, the RWI indicated that the corporation was amongst the NOCs that accounted for a lot of the money their countries' governments spend to finance its national budget, and so improvements in public reporting of their activities was critical especially for the enhancement of benchmarking and other elements of their governance.

Considering NNPC's role in Nigeria's national life, transparency was therefore top on the lists of expectations of industry experts for Kyari. In their interactions with THISDAY, these experts said they would want to Kyari to initiate a see-through process in management of the corporation's operations.

This, therefore tells Kyari whose appointment elicited a deluge of approval especially from the industry, that real transparency would be the first key performance indicator (KPI) on which his management of the NNPC would be measured by Nigerians and the industry.

In the first of the tweets he made from his official Twitter handle, shortly after his appointment was announced and stakeholders, Kyari, had pointed to this as perhaps the bedrock of his agenda for the NNPC.

"Deeply challenged to do more on transparency and accountability aspirations of @NGRPresident, @AsoRock @NNPCgroup, @nigeriaeiti #OOTT and the global transparency community," Kyari, had said while responding to a congratulatory tweet from the Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Mr. Waziri Adio.

He may have realised how important it is for the NNPC to truly embrace transparency and accountability in its management of Nigeria's hydrocarbon resources, and indicated he would put a lot of energy in making the NNPC come clean on all its businesses.

And, this by extension suggests he would run the corporation without failing to take its board along in key decision making processes, otherwise, his acclaimed reputation as an astute professional would be called to question.

Kyari, will also be expected to focus his attention on the implementation of the findings of the audit reports of the NEITI which has severally indicted the NNPC of operational maleficence.

According to years of NEITI's audit reports, the NNPC had over time recorded differences in actual volume of crude oil lifted and actual volume of production.

Also, on poor transactional transparency, the NEITI stated that its review of some JV partners' contributions revealed that cash call payments documented in cash-call schedule and template sometimes differed from actual payments reflected in JV operations bank statements. The corporation, it added has also failed to remit about $1.8 billion worth of gas flare penalty as at 2014.

Adio, noted that the implementation of the findings of NEITI's reports would not just be effective for the operations of NNPC, but also for optimisation of benefits of the oil and gas sector to Nigeria and Nigerians."

The refineries

Again, getting NNPC's decrepit refineries in Kaduna, Warri and Port Harcourt to work in such manner that the country's reliance on imported volumes of petroleum products which the NNPC is frequently accused of manipulating the figures to make questionable subsidy claims, should according to experts be another focus for Kyari.

In the last four years, NNPC expenditure or claims on petrol importation has risen and remained contentious. Such expenditure and importation activities have as claimed by experts placed the NNPC as a mere trader in the oil industry as against its potentials as a national oil company capable of establishing and running profitable ventures in the upstream, midstream and downstream sectors of the industry.

The refineries have also remained abysmally poor in operation, and mostly constituted a deficit to NNPC. Finding a solution to them would in many ways be a plus to Kyari and his team.

Kyari, would therefore have to move the NNPC away from its reported status of an oil trader to becoming a competitive player in petroleum products refining and sales especially as the Dangote refinery in Lagos looks set to begin operation; gas production and sales for power production and industrial uses; as well as rational and not emotional oil and gas exploration to grow Nigeria's reserves.

Downstream deregulation

As head of a NOC with huge influence, Kyari, should also make efforts to present convincing arguments to the national government, President Muhammadu Buhari especially for the deregulation of Nigeria's downstream petroleum sector.

As conceded by his predecessor, Dr. Maikanti Baru, the petrol which Nigeria spends huge sums of money to keep cheap is mostly taken away to neighbouring countries through smuggling routes, indicating that the country is rather supplying cheap petrol to its neighbours and not certainly to its citizens. The government could also make savings from a deregulated downstream sector.

Fuel Subsidy Removal

Experts have also advised the new NNPC boss to work towards ending the controversial fuel subsidy policy.

A recent World Bank report had shown that Nigeria spent N731 billion to subsidise petrol consumption last year. The report had explained that within the year under review, Nigeria's oil sector declined in productivity, ending on 1.9 million barrels a day (mbd) production mark as against the government's hope of 2.3mbd.

Also, the International Monetary Fund (IMF) advised the Nigerian government recently to jettison the policy and expend the funds on health, education and infrastructural development.

IMF's Managing Director, Mrs. Christine Lagarde, had said subsidy spending was infringing on other critical areas of capital development, hence the need for the government to refocus. The IMF chief said it was the monetary institution's general principle to discourage fossil fuel subsidies because of its consequences on other areas of life and development.

She had said: "As far as Nigeria is concerned, with the low revenue mobilisation that exists in the country; in terms of tax to Gross Domestic Product (GDP), Nigeria is amongst the lowest. A real effort has to be done in order to maintain a good public finance situation for the country and in order to direct investment towards health, education, and infrastructural development."

Highlighting some of the negative impacts of fuel subsidy, Lagarde said: "If you look at our numbers from 2015, it is no less than about $5.2 trillion that are spent on fuel subsidies and the consequences thereof. And the Fiscal Affairs Department has actually identified how much would have been saved fiscally but also in terms of human life, if there had been the right price on carbon emission as of 2015. Numbers are quite staggering.

"If that was to happen, then there would be more public spending available to build hospitals, to build roads, to build schools, and to support education and health for the people.

To analysts at the Financial Derivatives Company Limited, the country's fiscal burden would reduce by eight per cent if it stops subsidising petrol. The Lagos-based financial advisory and investment firm in a report stressed that although subsidy removal was not without its costs, the potential benefit far outweighs its cost.

It stated that subsidy savings could be utilised in the provision of essential social needs such as access to free education and quality healthcare services.

These services, according to the report, are crucial to the improvement of living standard and the quality of life of the average Nigerian.

It stated: "More importantly is the reduction in the fiscal burden by at least eight per cent. Economic prudence, which emphasises the need to be discerning and forward-looking, has been the clamour for pro-subsidy advocates like the IMF.

"The fund is now sounding like a broken record on the call for the removal of subsidies. In the last three decades, it has become a vicious cycle - IMF recommendation on subsidy removal, followed by fuel queues, adjustment and in some cases the IMF is ignored and then intended and unintended consequences that follow."

Nevertheless, while it reiterated that subsidy was not disdained in itself, it noted that its abuse and inefficient administration of the incentive, "has made it a fraud that must be checked."

o the Manufacturers Association of Nigeria (MAN), there is need for a dialogue between the federal government and other relevant stakeholders on the matter. MAN stressed that if no efforts were made to carry Nigerians along on such a national issue.

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