How Mele Kyari Strengthened NNPC Towards Global Excellence In Two Years

By Adewole Kehinde

Transparency is all about letting in and embracing new ideas, new technology and new approaches. No individual, entity or agency, no matter how smart, how old, or how experienced, can afford to stop learning - Gina McCarthy

No executive in the world would turn down operational excellence if you handed it to them on a platter even if they don’t exactly know what it is. It just sounds like something awesome.

In order to be achieved, it must be clearly understood, injected into the culture, and supported with a methodology to guide decisions. The principles of excellence must become ingrained in everyday activities.

Getting there is not easy, but it is operationally excellent companies that can achieve rapid growth and sustain a leading market position.

Operational Excellence is a philosophy of the workplace where problem-solving, teamwork and leadership results in the ongoing improvement in an organization.

The process involves focusing on the customers' needs, keeping the employees positive and empowered and continually improving the current activities in the workplace.

When you are transparent, you invite trust by revealing that you have nothing to hide. You establish yourself as an honest, credible person in the eyes of others. The prospect of being open and vulnerable may make you nervous, but the digital revolution has made transparency a matter of survival.

Transparency implies openness, communication and accountability.

Transparency in leadership means keeping your employees in the loop, sharing the good and the bad and welcoming honest feedback from the members of your team.

Transparency is critical, especially for extractive companies. Apart from ensuring that information about operations and finances is made available to the public, a transparent company allows stakeholders to measure performance. It guards against mismanagement of funds. It puts officeholders in check and creates a system that will eliminate inefficiency. Accountability is feasible with transparency, especially when the public uses available information to hold public servants accountable.

Transparency, accountability and corruption are critical issues in Nigeria’s oil sector. Stakeholders have repeatedly stressed the need for oil firms to become less-opaque. With the level of devastation that the industry has witnessed due to COVID-19 and trade wars, oil firms, especially the National Oil Companies (NOCs) of countries like Nigeria, which mainly rely on the extractive industry for revenue have no option than to become efficient, profitable and open.

It is imperative to note that across the world, NOCs unlike the international oil companies (IOCs) support the state. With the oil price crash and emerging challenges in the energy sector, there is an urgent need for such National Oil Companies to become more competitive while supporting the state.

Being a leading player in the industry and Nigeria’s key revenue earner, NNPC has repeatedly been under attack for lack of transparency and accountability. These challenges have been further worsened by the inability of the NNPC to make profit. Industry players have insisted that unless it becomes transparent, efficiency and profitability may remain elusive.

In 2015, NNPC took a step to open its accounts to ‎the public with its monthly financial and operational reports. The reports capture key performances and typically reveal the true state of the oil firm. The reports for the past few years have also highlighted the deep-rooted challenges confronting the NOC, especially in the absence of the Petroleum Industry Bill.

They have equally elicited commendations, especially for performing entities of the group and agitations against loss making entities, especially the refineries.

Although the NNPC has sustained the monthly report for six years, some stakeholders have noted gaps. Part of the concerns was the need for the Corporation to release its audited report as part of measures to capture the loopholes not covered in the financial report.

Taking over from Maikanti Baru in July 2019 as the Group Managing Director of the Corporation, Mele Kyari had promised to open up NNPC books to shareholders and the Nigerian public.

Kyari later released an agenda focusing on Transparency, Accountability and Performance Excellence. He had said the TAPE would be the five-step strategic roadmap for NNPC’s attainment of efficiency and global excellence. Those steps are fast becoming a game-changer, with significant results.

In 2019, the NNPC for the first time released its full audited report. The development generated commendation from local and international bodies, which saw the move as a step to achieving projected objectives at the firm.

The 2018 financial report showed the dismal outlook of NNPC, particularly as it recorded losses in the region of N803 billion, which aroused some criticisms as some stakeholders came hard on the Corporation, insisting that the NNPC was performing below par, when compared with other National Oil Companies.

But the Nigeria Extractive Industries Transparency Initiative (NEITI) specifically described the release of the audited report as a positive step that signals more openness for the oil and gas sector and for Nigeria.

The industry watchdog and many other players noted that the move could be a leeway that could launch NNPC permanently on the path of growth.

In August 2020, the global body of Extractive Industries Transparency Initiative, named NNPC an EITI supporting company, joining a group of over 65 extractives companies, state-owned enterprises, commodity traders, financial institutions and industry partners, who commit to observing the expectations.

In 2020, the Corporation released its 2019 audited financial statement. The new audited report, which captured all its subsidiaries revealed a significant reduction in performance.

Its loss profile, which stood at ₦803 billion in 2018 dropped to ₦1.7 billion, while administrative expenses reduced from ₦894 billion in 2018 to ₦696billion in 2019.

Most of the NNPC’s subsidiaries also posted improved performance. The Nigerian Petroleum Development Company Limited (NPDC), recorded ₦479 billion profit in 2019 compared to ₦179billion in 2018, representing 167 per cent increase. The Integrated Data Sciences Limited (IDSL), recorded ₦23billion profit in 2019 compared to ₦154million in 2018. The Petroleum Products Marketing Company (PPMC), recorded ₦14.2 billion profit in 2019 compared to ₦9.3billion in 2018.

Some critics argued that the 2019 report showed NNPC as still on the brink of bankruptcy and a growing concern since its liabilities were still higher than assets.

However, the determination of the current NNPC management under Mallam Mele Kyari to make a difference must be commended and also encourage players across sectors to look at holistic strategies and steps that would ensure that Nigeria boasts of a National Oil Companies that will contribute significantly to its economic development.

Some stakeholders also believe the Kyari-led management’s transparency and accountability drive can improve the excellent performance being witnessed in the Corporation.

There is no doubt that providing credible information about revenue, assets and expenditure is one of the most basic requirements of regulatory excellence.

Mal Mele Kyari and its NNPC management must be commended for the new steps to institute transparency, which can significantly restore public confidence and trust, thereby lifting the burden of allegations, and at times misinformation, which has trailed the NNPC for over 44 years.

In order to retain public confidence and trust, the Nigerian National Petroleum Corporation must not only be open and transparent, it must also be seen as transparent by the public. Lack of transparency feeds the suspicion of conflict of interest, corruption and lack of integrity even when it is absent.

On assumption of office, Mallam Mele Kyari pledged to open the NNPC financial books to the public as part of his management’s commitment to openness, transparency, and accountability in line with the global EITI principles.

Since 2019, the NNPC has always published the monthly financial and operational reports, including its upstream, downstream and oil and gas export activities.

The NNPC's Financial and Operations reports constitute the following and more: NNPC Audited Financial Statements; NNPC Monthly FAAC Reports; National Crude Oil & Natural Gas Production, Lifting and Utilization; Refinery Operations; Petroleum Product Supply & Distribution; Budget Performance Report and Federation Crude Oil & Gas Revenue.

It is on record that Kyari published the audited accounts of NNPC for 2018 and 2019. Now, that is abnormal in an environment where being normal is to do the opposite: Don’t audit, don’t publish. Keep our secret to ourselves. It is almost crazy, insane. But Kyari is not crazy; never insane.

Was he merely showing off? Why would he take the lid off what many people perceive as a furious pot of corruption? He explains why. Nigerian National Petroleum Corporation is owned by Nigerians, meaning that over 200 million Nigerians are the shareholders. This means he and his team at NNPC are employed by Nigerians to help manage the industry upon which the National Budget is benchmarked.

Therefore, the same shareholders have a right to know how their business is being managed; to establish whether the enterprise is running at a loss or profitably. Keeping the books open will place a great deal of responsibility on the shoulders of the managers.

Kyari is not afraid of responsibility and accountability and the records are there to show it. Early this year, Nigerian National Petroleum Corporation published the 2018 audited account. The result showed a loss of N803billion.

This got the management adopting smarter strategies to run lean and mean; to cut cost and turn the corner. It worked. By the time it released the 2019 audited financial statement, it had achieved 99.7% reduction in its loss status, cutting loss from N803bn in 2018 to N1.7bn in 2019.

This would never have been possible if Mele Kyari had not summoned the courage to go public with the 2018 financial statement.

The huge loss in 2018 made them to stop leakages, improve on forethought and introduce cost-saving measures.

Kyari says there is a rebranded NNPC with a fresh panorama and obligation to transparency and accountability in consonance with the global principles of the Extractive Industries Transparency Initiative (EITI).

He has kicked a fresh breath of openness into the Nigerian National Petroleum Corporation. He has refused to follow the crowd. He has decided to do things differently; to account to his employers, Nigerians.

Kyari’s insistence to depart from the path of past GMD's of the Corporation who kept the books sealed has already set him apart from the crowd.

And it sure would take him to places none of his predecessors has ever seen or been before.

Kyari’s insistence to open the books to Nigerians is itself a constitutional fulfillment.

It takes courage to do this. As the NNPC Group Managing Director marks its 2nd Year in office, I commend him and his entire Management Team for taking NNPC out of Murkiness to Transparency.

Adewole Kehinde is the Publisher of Swift Reporters and Public Affairs Analysts based in Abuja and can be reached via 08166240846, 08123608662