Since he assumed office, Mr Kyari has pursued his Transparency, Accountability and Performance Excellence (TAPE) agenda, a five-step strategic roadmap for NNPC's attainment of efficiency and global excellence.
Since assumption of office as the Group Chief Executive Officer of the Nigerian National Petroleum Corporation on July 8,2019, Mele Kyari has put in place a robust operational blueprint that has reduced costs and improved profitability for the National Oil Company.
Shortly after his appointment, Mr Kyari made his plans very clear for the Corporation which has now been transformed into a Limited Liability Company in line with the Petroleum Industry Act 2021. Specifically, his plans centered around operational efficiency and transparency for NNPC Limited.
"Going forward, we will seek to continuously entrench transparency, accountability, and performance excellence across all NNPC operations, and we will put the necessary structures in place to ensure compliance with these principles," he said shortly after assumption of office.
Before Mr Kyari's appointment, the manner in which the old NNPC managed its financial activities was a subject of controversy in the public sphere. The old NNPC was mostly accused of running an opaque operation where a few but not its majority shareholders - the Nigerian public, knew its financial status.
While this portrayed the NNPC as an untrustworthy entity back then, it also courted and swarm in controversies of financial immodesty, poor accountability, lack of profitability and even considered broke.
Between the Nigeria Extractive Industries Initiative (NEITI) - a natural resource utilization watchdog, and the Auditor General of the Federation, dealing with the NNPC to get it to account for its financial transactions was distressing. That was because the corporation was always recalcitrant in opening up its book for public scrutiny.
But under Mr Kyari's Transparency, Accountability and Performance Excellence (TAPE) agenda, the era of opaqueness in managing the affairs of the NNPC has since ended.
It is a well-known fact that in economics, cost minimization is a necessary condition for profit maximization in competitive markets. This is because, if, for a given level of output, a firm does not minimize costs, it therefore means that it is also not profit maximizing.
Within the first year of managing the NNPC, Mr Kyari, through his cost reduction strategy, was able to reduce NNPC's losses from N803bn in 2018 to N1.7bn in 2019 before the eventual declaration of the N287bn Net Profit in 2020.
Interestingly, the 2020 financial period is the first time in the 44-year history of the NNPC that the Corporation declared profit.
While revealing the facts behind the financial statement, Mr Kyari gave credence to the impact the cost reduction strategy had on the finances of the NNPC. Specifically, he said the National Oil Company did not buy what was not vital to its 2020 operations.
Mr Kyari said, "What we did to arrive at this (N287bn profit), I think it is a continuous process. Since this administration came into being in 2015, there was a very drastic change in the way we do our business.
"One is to cut cost, to be more efficient and also to ensure that this company is transparent and accountable to Nigerians and therefore it is a process that started in 2015 on the commencement of the administration of President Muhammadu Buhari who has consistently being the Minister of Petroleum Resources in 2015 till this day and the end result is that, that piloting gave us the opportunity to do things differently.
"And because it is a continuous process, when I came onboard, I learnt from what was on ground and also brought a new perspective which is to ensure that I build on what I met and to collaborate and steer the direction of the Board of Directors of this company to ensure that cost is reduced.
"The combination of all these is the result we posted. First is the reduction of the losses in 2019. It is a collective activity, collective action, but ultimately, the things that we did make it possible."
It is also important to state that the NNPC, under the leadership of Mr Kyari, was able to engage all its contractors and insisted on cutting costs to at least 30 per cent in the 2020 financial period. This engagement with contractors worked and the NNPC was able to pull down most of its procurement cost by 30 per cent.
It is also instructive to state that the NNPC saw the opportunity to be much more efficient by automating its systems and processes. This made it faster, and also ultimately, it reduced so much of logistics cost that would have been an additional cost to the business.
Amidst the challenging operating environment which has tested the resilience of institutions and businesses globally, the NNPC continued to weather the storm by posting its second consecutive year of profit of N674.1bn in the 2021 financial period. This positive result came as global economies struggled with the recessionary forces and weak economic outlook.
In spite of a tough and volatile operating environment, the NNPC Group's investment strategy proved resilient and enabled the National Oil Company to deliver favourable outcomes as shown by the 2021 financial statement. For instance, the NNPC Group, which became a CAMA Company in 2021 following the implementation of the Petroleum Industry Act, grew its profit from N287bn in 2020 to N674bn in 2021. The NNPC's Group Account was audited by PriceWaterhouseCoopers, SIAO, and Muntari Dangana Accounting Firms.
The N674bn profit posted by the NNPC Group in the 2021 financial period represents an increase of N387bn or 134.8 per cent when compared to the N287bn recorded in 2020.
The 2021 financial year made it the fourth consecutive years that the NNPC will be making its Audited Financial Statement public. This was one of the innovations made by Kyari when he took over the helms of affairs of the National Oil Company.
In 2018 when the NNPC first made public its Audited Financial Statement, it made a loss of N803.9bn. Three components were responsible for the poor and worse performance of the Group ever. They were increase in cost of sales, specifically increase in crude cost; increase in the general and admin expense which almost doubled from N474bn to N894bn; and increase in impairment of receivables and other assets in the year by almost 300 per cent.
In 2019 when the NNPC Group's Audited Account was released, the loss position had reduced to just N2.3bn. But with the reforms that are being implemented by the NNPC boss, the loss position was reversed in the 2020 financial period when the NNPC posted its first profit in 44 years of N287bn.
Since then, the Company has bounced back to reckoning with impressive financial performance of N674bn in 2021. The rise in profit is mainly occasioned by significant increase in revenue and less proportionate increase in cost of sales resulting in 1,556.9 per cent increase in gross profit.
Other factors that contributed to the high profitability of the NNPC Group is the outcome of the N173.7bn arising from reconciliation with the Federal Inland Revenue Service (FIRS), stronger emphasis on performance management, rationalization of non-essential expenditure and implementation of the transparency and accountability agenda.
The impressive profit performance recorded by the NNPC was further bolstered by the positive impact of the N193bn royalty which was written back as a result of the reconciliation with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). Similarly, the emplacement of aggressive cost control measures by the NNPC management as well as the successes made in the implementation of system-based controls on funds management also boosted profitability.
Further analysis of the NNPC Group Audited Financial Statement showed that revenue rose by 72.6 per cent to N6.42trn in 2021 as against N3.72trn in 2020. The increase in revenue is attributable to improvement in the production and price of crude oil during the period under review.
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The Audited Financial Statement further revealed an increase of 2.6 per cent in total assets from N15.86trn in 2020 to N16.27trn in 2021. Through efficient management of the affairs of the company, the Audited Financial Statement also showed that total liabilities decreased by 8.3 per cent from N14.68trn in 2020 to N13.46trn in 2021.
In line with the growth trajectory of the current management, the shareholders fund position of the NNPC Group also followed an upward trend as it rose to N2.81trn in 2021 as against N1.15trn in 2020. This represents 144 per cent increase in shareholders fund as of December 31, 2021. The net impairment loss on financial assets dropped to N65bn in 2021 as against the impairment reversal of N713bn in 2020.
Since he assumed office, Mr Kyari has pursued his Transparency, Accountability and Performance Excellence (TAPE) agenda, a five-step strategic roadmap for NNPC's attainment of efficiency and global excellence.
Mr Kyari, during the inauguration, had said pursuing TAPE was the only way to turn around the corporation and make it competitive. Under the roadmap, the Transparency component of the agenda was aimed at maintaining positive image, share values of integrity and transparency to all stakeholders, while the Accountability segment of the campaign is to assure compliance with business ethics, policies, regulations and accountability to all stakeholders.
In terms of the two-prong item of Performance Excellence, the idea was to entrench a high level of efficiency anchored on efficient implementation of business processes which would also emplace an appropriate reward system for exceptional performance among the workforce.
Unlike in the past when efficiency was compromised by tardiness, Mr Kyari is focused on delivering his mandate for the NNPC and the oil and gas industry is no doubt the better for it while Nigerians are the ultimate beneficiary.
