By NIyi Jacobs
The Nigerian National Petroleum Company Limited (NNPC Ltd) recently found itself in an embarrassing position following the premature announcement of its intention to list on the floor capital market.
BusinessNG notes that the now-withdrawn press statement highlighted plans to initiate an Initial Public Offering (IPO), an exercise described as the “NNPC Ltd. IPO Beauty Parade.”
However, within 24 hours of posting on the X social media platform, the company retracted the statement, citing the need for compliance with legal and regulatory frameworks.
This misstep raises critical questions about the NNPC’s readiness for a listing and the broader implications of such a move. While the Petroleum Industry Act (PIA) 2021 provides a pathway for the commercialization of NNPC, the process must be undertaken with meticulous planning, strategic foresight, and strict adherence to governance protocols.
The premature announcement not only suggests a lack of preparedness but also exposes the company to potential regulatory scrutiny and investor skepticism.
The PIA 2021 transformed NNPC into a limited liability company, allowing it to operate commercially and potentially list on the stock exchange. However, section 53(5) of the Act specifies that government-owned shares cannot be transferred without the approval of the National Economic Council (NEC) or the federal government.
This immediately calls into question whether due process had been followed before the IPO announcement. Market analysts, including Kelvin Emmanuel, have raised pertinent concerns about whether the NEC had given its approval for the share transfer, how the evaluation and classification of NNPC’s assets and liabilities would be conducted, and how potential legal liabilities such as ongoing court cases and decommissioning costs would be addressed.
The percentage of shares to be floated also remains uncertain, with no clear information on whether the government plans to sell 30%, 40%, or 50%. Furthermore, questions have emerged regarding the fate of NNPC’s beneficial ownership in critical assets like the West African Gas Pipeline Company (27%) and NLNG (49%).
NNPC’s proposed listing aligns with the broader goal of asset securitization and privatization, a move championed by economists such as Dr. Ayo Teriba and Dr. Tilewa Adebajo.
BusinessNG analysts, in their recent report titled argue that Nigeria must shift from an income-centric approach to an asset-driven economic model.
By listing state-owned enterprises like NNPC, the government can unlock economic value, attract investment, and reduce dependence on debt financing.
However, while the move is economically sound, the execution must be carefully managed to prevent policy missteps and market uncertainty.
If NNPC is to successfully go public, several key steps must be undertaken. Regulatory approvals must be secured, starting with NEC approval for the share transfer, compliance with Nigerian Exchange Limited (NGX) listing rules, and approval from the Securities and Exchange Commission (SEC).
Asset and liability management is also crucial, requiring a thorough evaluation of NNPC’s assets, including oil reserves and infrastructure, and the identification of contingent liabilities such as pending litigations and remediation costs.
A framework for managing inherited liabilities for future shareholders must be developed to prevent post-listing disputes. Governance and transparency measures must be strengthened through the appointment of independent auditors and book-runners, clear guidelines for public disclosures and investor relations, and the adoption of global best practices in corporate governance. Strategic investor engagement is equally vital, necessitating the targeting of institutional investors and pension funds, fair valuation and competitive pricing of shares, and a robust investor communication strategy.
NNPC can learn from successful oil IPOs, such as Saudi Aramco’s record-breaking $29.4 billion IPO in 2019. The Aramco listing was preceded by meticulous planning, transparency in disclosures, and strategic engagement with investors. Unlike the rushed and subsequently withdrawn NNPC statement, the Saudi Aramco spent years preparing its financials, ensuring regulatory compliance, and securing investor confidence.
The success of Aramco’s IPO demonstrated that while privatization and public listings can unlock economic value, they require time, effort, and a commitment to transparency.
Following the IPO debacle, NNPC must reassess its strategy. The company must move beyond political optics and focus on executing a well-structured listing process.
A poorly executed IPO can erode investor confidence and create uncertainty in the energy sector. However, if properly handled, a successful NNPC listing can be a game-changer for Nigeria’s economy, providing fresh capital for infrastructure projects and reducing fiscal pressure on government finances.
A clear roadmap must be developed, one that involves all relevant stakeholders, follows due process, and ensures that the company is market-ready before making any public announcements.
NNPC’s premature IPO announcement underscores the importance of process, regulatory compliance, and strategic communication in corporate governance.
Moving forward, the company must prioritize due diligence, secure necessary approvals, and engage investors with a well-thought-out plan. If done right, an NNPC IPO could usher in a new era of transparency, efficiency, and investment in Nigeria’s oil and gas sector.
However, any attempt to cut corners will only lead to reputational damage and market skepticism.
….The full analysis will be available in BusinessNG Newspaper on Monday
