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The Birth Of NNPC Limited And What It Means For Nigeria’s Oil And Gas Industry – Government Contracts, Procurement & PPP


On July 19, 2022, the Nigerian government made an official
announcement confirming the complete transformation of the Nigerian
National Petroleum Corporation (NNPC) into NNPC Limited (NNPCL).
NNPCL is a brainchild of the Nigerian Petroleum Industry Act (PIA)
which was passed into law in August 20211. The NNPC was
a state-owned and controlled corporation licensed to operate in the
country’s petroleum industry which utilized the country’s
fossil fuel and natural gas reserves by partnering with foreign oil
companies. The new NNPCL, while still wholly owned by the State, is
intended to operate as a fully commercial venture without
government funding (besides the initial capitalization) or control
and is expected to be regulated by the Companies and Allied Matters
Act 2020.2 In addition, NNPCL will now declare dividends
to shareholders while retaining 20 percent of profits to grow its
business.3 NNPCL is expected to sometime in the
future4, invite the public to purchase shares to raise
equity capital for the business of the company especially as it
would no longer have access to state funds in line with the
objective to commercialise the corporation.

It is also expected that NNPCL would eventually achieve trading
status on global stock exchange markets like its counterparts,
including Saudi Arabia’s Arabian American Oil Company (ARAMCO)
Brazil’s Petróleo Brasileiro (Petrobras) to name a few.
NNPCL will also no longer be concerned with issues of petrol
pricing and subsidy, neither will it continue to remit funds into
the Federation Accounts Allocation Committee (FAAC) such that the
company funds can be used to further its business rather than
issuing national payouts.

Yet, while the introduction of the NNPCL promises to be
advantageous to the country’s energy industry, realistically
speaking, there are certain challenges that need to be promptly and
properly addressed for the new NNPCL to function effectively and
achieve its objectives. To mention a few, continued government
influence, NNPC’s transfer of liabilities to NNPCL, corporate
governance issues are at the top of concerns.

Government influence concerns

Unlike its state-owned counterparts Saudi’s Aramco and
Petrobras of Brazil, the former NNPC had a structure that largely
depended on government funding thus making it less competitive and
less attractive to global investors especially International Oil
Companies (IOCs) who were uncomfortable doing business with the
Corporation due to fears of undue government influence, grotesque
policies and unnecessary bureaucratic delays. While the new NNPCL
is promised to be fully independent of government control, it
remains wholly owned by the government and its initial capital will
be completely provided by the government per the provisions of the
PIA.5 Section 53(5) of the PIA also provides that all
shares of the company held by the government will not be
transferable or mortgaged unless approved by the government and the
National Economic Council. To own is to control in any business
enterprise so it is unclear how government influence would be
avoided in NNPCL when it is wholly owned and capitalized by the
government. A better approach would be to provide for a mechanism
that splits the shares between the government and the public in a
particular ratio such that while the government may understandably
retain controlling shares to protect national interest6
there are checks and balance measures in place to avoid

Furthermore, the PIA incorporates an automatic transfer of all
existing employees under the former NNPC into the new NNPCL with no
vetting procedure for these employees in place. Section 57(1) under
discuss states as follows:

Upon incorporation of NNPC Limited under section 53 of this
Act, employees of NNPC and its subsidiaries shall be deemed to be
employees of NNPC Limited on terms and conditions not less
favourable than that enjoyed prior to the transfer of service and
shall be deemed to be service for employment-related entitlements
as specified under any applicable law.

This means that NNPCL will have substantially the same employees
as the former NNPC which is tantamount to pouring new wine into old
wineskins. It is understandable that the lawmakers were wary of
leaving the employees of the former NNPC redundant upon the
transition. However, the automatic retention of former NNPC staff
is counterproductive because NNPCL essentially inherits its all of
its predecessor’s employees, some of whom are controversially
unqualified and redundant thereby stunting its growth

The PIA goes further to provide for the appointment of a Board
of the NNPCL whose appointment shall be done by the President of
the country.7 Another interesting provision is Section
58(2)(r) which provides that the Board should among others consist
of ‘six (6) non-executive members with at least 15 years
post-qualification cognate experience in petroleum or any other
relevant sector of the economy, one from each geopolitical
effectively politicizing the appointment of these
individuals to the board as opposed to appointments strictly based
on merit. Perhaps realizing that the previous provisions on
appointment to the new NNPCL Board may be inconsistent with the new
NNPCLs ‘no government influence’ mandate, the
lawmakers included a proviso in Section 58(5) stating that the
provisions of the section would only apply where NNPCL remains
wholly owned by the government after which the composition would
then be determined by the new shareholders after the sale of shares
to the public. This may appear to resolve the evident problem,
however, the shares of the new NNPCL will not be made available to
the public until an unknown time in the future which is not
specifically stipulated under the Act.

Although NNPCL’s Chief Executive Officer intimated that the
company would be ready for an Initial Public Offering (IPO) mid
2023, this is not set in stone as factors such as governmental and
bureaucratic delays in organization may extend this timeline.
Afterall, it did take almost a year to fully effect the provision
to incorporate the new NNPCL as opposed to the 6 months timeline
stipulated in the PIA. In any case, even if there are no delays in
the estimated timeline for the sale of shares to the public, the
IPO process, appointment of new Board members and other corporate
procedure could take months at the earliest to effect. This means
that the NNPCL would still be run by old NNPC officials pending
formalization of all corporate procedures thus making the new NNPCL
‘government’ run for at least the foreseeable future.
Effectively, this results in NNPCL failing its first mandate as a
fully commercialized company i.e to be free of government influence
and control.

Transfer of liabilities

Another concern is the provision of the PIA which transfers
liabilities from the old NNPC to the new NNPCL. This is provided
for under Section 54(1):

the Minister of Petroleum and the Minister of Finance shall
within 18 months of the effective date determine the assets,
interests and liabilities of NNPC to be transferred to NNPC Limited
or its subsidiaries and upon the identification, the Minister shall
cause such assets, interests and liabilities to be transferred to
NNPC Limited

Further provisions of the section discuss issues of assets that
would remain with NNPC or the government, actions that may be
brought against NNPCL, NNPC, or the government, etc. However, the
mechanism for the determination of which assets and liabilities
would pass on to NNPCL and which would be dealt with by the old
NNPC/Government are not stipulated in the PIA, leaving much to the
discretion of the Minister for Petroleum and Finance with some
assistance from the Attorney General of the Federation in peculiar
circumstances. Section 54(2) states as follows:

Assets, interests and liabilities of NNPC not transferred
NNPC Limited or its subsidiary under subsection (1), shall
remain the assets, interests, and liabilities of NNPC until
they become extinguished or transferred to the Government and six
months following the determination under section 54 (1) of this
Act, the Minister, the Minister of Finance and the Attorney-General
of the Federation shall develop a framework for the payment of the
labilities not transferred to NNPC Limited and if such
determination for which assets, interests and liabilities to be
transferred has not been concluded within the stipulated period of
18 months, all the assets, interests, liabilities of NNPC is deemed
to be transferred to NNPC Limited after 18 months from the
effective date

A spruce way to deal with the inherited assets and liabilities
from NNPC would have been to make provision for the creation of an
SPV to specifically deal with these issues, especially with respect
to the liabilities rather than burden the NNPCL with the old
NNPC’s mammoth liabilities in its formative years when it
should be focused on its growth. It is hoped that the Ministers
would devise suitable mechanisms to deal with these in the most
efficient and least invasive way possible.

Corporate Governance considerations

As a corporate entity, NNPCL will be governed by Nigeria’s
corporate laws as enshrined in the Companies and Allied Matters Act
(CAMA). Of particular importance are some of the corporate
governance principles contained in CAMA which are there to ensure
international best practice in the day-to-day operations of
Nigerian corporations including provisions on separations of the
role of Chairman and Chief Executive Officer, appointment of
Independent Directors, limitation of multiple directorships,
disqualification from appointment as a director, disclosure
provisions among others. It is expected that upon the IPO of NNPCL,
it would become a Public Limited Liability Company (Plc) and
thereby subject to more stringent corporate governance and
disclosure policies even beyond the statutory requirements under

Some of the corporate governance sections under CAMA include
provisions which state that every public company must have at least
three (3) independent directors appointed in line with the required
qualifications stipulated;9 Directors may not serve on
the board of more than five (5) public companies at a time;
disqualified directors now include directors that were removed from
the Board;10 and attendance of Board meetings is now a
factor for re-election.11 On its disclosure obligations,
NNPCL is expected to ensure that information on the Memorandum and
Articles of Association of the company is accessible to the public
and potential investors. The shareholding structure12,
shareholders13, authorized share capital, exact date of
incorporation e.t.c all need to be fully disclosed to the public to
ensure compliance with the provisions of the PIA and CAMA. Records
of the minutes of the meeting where the first directors are
appointed, board resolutions for the nomination of the Chairman
e.t.c all need to be public knowledge to ensure complete
transparency and fulfil all international best practice disclosure

Worthy of note is Section 60-63 of the PIA which attempts to
cater for some corporate governance concerns of the new NNPCL.
However, the provisions seem to be merely advisory and no
liabilities are imposed for any failure to carry out such
responsibilities. Thus, recourse is to be had to CAMA and its
regulatory body, the Corporate Affairs Commission (CAC) for the
enforcement of these provisions in addition to the provisions of


On the whole and having considered some salient issues with
respect to the new NNPCL, there are some who believe that the
transformation of the NNPC into NNPCL is merely a name change and
that there would be no material difference from the old structure
especially as the NNPC has operated as a highly institutionalized
corporation for the last 45 years. Whether they are right or wrong,
only time will tell.

However, it is important to remain optimistic that with the
right corporate administration, NNPCL can create an environment
that would not only grow the country’s economy but also attract
both local and foreign investment thereby making it a major player
in the global energy market.

Originally published 16 August, 2022

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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