Hector Igbikiowubo

Lagos —

President Bola Ahmed Tinubu’s move to dismiss the board of NNPC Ltd and designate Bayo Ojulari as the new Group CEO signals the conclusion of Mallam Mele Kyari’s tenure, which was characterized by both progress and standstill.

In July 2019, Mele Kyari, who previously served as the Group General Manager for Crude Oil Marketing at NNPC and has expertise in geology, was selected as the Group Managing Director (and later became the Group CEO following incorporation) by former President Muhammadu Buhari. During his term, he oversaw the transformation of NNPC from a government-operated entity into a profit-oriented limited liability firm pursuant to the provisions of the Petroleum Industry Act (PIA) 2021.

Key Highlights of Kyari’s Leadership

Execution of the Petroleum Industry Act (PIA) 2021

Kyari led the transformation of NNPC into NNPC Ltd., a business-focused organization, adhering to the guidelines set by the PIA. The objective was to enhance transparency and encourage private capital involvement.

Enhanced Oil Output (Occasionally)

During Kyari’s tenure, Nigeria experienced phases of enhanced oil output, reaching above 1.8 million barrels per day (bpd) at the beginning of 2020 before experiencing a significant drop because of oil theft and sabotage of pipelines.

Dangote refinery agreement along with modular refineries drive

Kyari secured a crude supply pact with the Dangote Refinery, anticipated to decrease Nigeria’s reliance on imported fuels. Additionally, he backed initiatives for modular refineries aimed at enhancing domestic refining capabilities.

Nigeria-Morocco Gas Pipeline Project

The NNPC, led by Kyari, has progressed with talks regarding the $25 billion Nigeria-Morocco Gas Pipeline project, which aims to enhance gas shipments to Europe as part of a major initiative.

Automation and Transparency Measures

Kyari implemented digital monitoring systems to combat crude oil theft and released the Nigerian National Petroleum Corporation’s (NNPC) inaugural set of audited financial statements from 2018 to 2020. However, skeptics raised doubts about the comprehensiveness of these reports.

Low Points and Controversies

No Transfers to Federation Account (2020-2022)

For many years, NNPC did not transfer revenue to the Federation Account because of deductions related to petroleum subsidies and operating expenses. In 2022, the corporation announced no transfers were made at all, which caused significant anger among state governments and the federal authorities.

Petroleum Subsidy Mismanagement

Under Kyari, the subsidy payments increased dramatically from ₦154 billion in 2019 to more than ₦4 trillion in 2022, depleting government resources. TheNNPC’s exclusive management of these subsidies was opaque, resulting in claims of corruption and ineffectiveness.

Large-Scale Fuel Theft and Falling Output

In spite of Kyari’s endeavors, crude oil theft escalated to record highs, causing Nigeria to lose more than 400,000 barrels per day at its worst point in 2022. Consequently, this resulted in a decline in production down to around 900,000 barrels per day, significantly affecting revenues.

Debated Oil Drilling Ventures in the Northern Regions

Kyari advocated for oil exploration in the northern region, with particular emphasis on the Kolmani River project. This initiative was viewed as politically motivated by many critics who argued against its economic feasibility because of insufficient confirmed reserves.

Fuel Shortage and Reliance on Imports

Even though Nigeria is Africa’s leading oil producer, the country experienced ongoing fuel shortages during Kyari’s tenure because of the NNPC’s control over imports and the inefficient distribution system.

Problematic Inspections and Incomplete Openness

Although Kyari attempted to make NNPC’s financial records transparent, audits uncovered significant deficits amounting to ₦803 billion in 2018 and ₦1.7 trillion in 2019, which sparked worries regarding budgetary control.

Unsuccessful Overhaul of NNPC refineries Amidst Significant Spending

One of the most controversial elements during Mele Kyari’s term was the **ineffective revitalization of Nigeria’s government-run refineries**, including those in Port Harcourt, Warri, and Kaduna, despite significant financial investments amounting to billions of dollars.

$1.5 Billion Authorized for Rehabilitating Port Harcourt Refinery (2021)

In 2021, Kyari disclosed that the federal government had sanctioned $1.5 billion for the revamping of the Port Harcourt refinery, aiming to finish everything by 2023. Nevertheless, come 2024, the facility still isn’t operational, and ongoing postponements have been attributed to “technical problems.”

Warri and Kaduna refineries also halted:

Rehabilitation initiatives for the Warri ($1.2 billion) and Kaduna refineries were announced similarly, yet they failed to materialize into tangible outcomes. Consequently, Nigeria persisted with costly fuel imports, resulting in significant subsidy expenses for the country.

Refinery Inoperative for Half a Decade

Even with Kyari’s reassurances, none of the refineries restarted operations during his tenure, which sparked doubts about how the finances were handled and whether the overhaul was genuinely committed to.

NNPC’s Decreasing Stake in Dangote Refinery

In 2021, the NNPC declared that it had obtained a 20% share in the $19 billion Dangote Refinery, which is the biggest refinery in Africa. This acquisition was intended as a strategic step to ensure a stable domestic fuel supply. Nonetheless, disputes quickly arose surrounding this development.

Real Stake Apparently Less Than Stated:

The investigation found that NNPC’s real financial input was significantly lower than the anticipated $2.76 billion (which represents 20% of $19 billion). In reality, NNPC paid for just 7.2%, totaling $1 billion, along with an extra $36 million as transaction fees. These payments were sourced via a $1.036 billion loan provided by Lekon Refinery Funding Limited.

Financing with Debt Rather Than Direct Investment?

Several reports indicated that NNPC’s “investment” was designed more like an oil-backed loan instead of a simple equity acquisition. This implies that Nigeria might still face potential repayment risks rather than gaining complete access to profits.

Controversy Over Crude Supply: Can NNPC reliably provide for Dangote Refinery?

The Dangote Refinery was intended to operate using Nigerian oil, yet questions have arisen regarding the NNPC’s capability to provide the necessary raw materials, owing to:

Nigeria’s Declining Oil Production:

Given that crude production has dropped beneath 1.4 million barrels per day—falling well short of the OPEC target—there are worries about whether NNPC will be able to fulfill both its delivery commitments to the Dangote Refinery and honor ongoing export agreements.

Subsidies Debt and Crude-for-Fuel Barter Agreements:

The current crude swap deals of NNPC (such as the Direct Sale, Direct Purchase, DSDP arrangement) might clash with providing crude oil to The Dangote Refinery, which could result in potential fuel supply interruptions should priority issues arise.

Allegations of Favoritism:

Critics contend that the agreement between NNPC and Dangote Refinery unfairly favors a private company and does little to revitalize Nigeria’s domestic refining capabilities, sparking concerns over equity and the nation’s best interests.

A Mixed Legacy

During Mele Kyari’s term, his administration presented a mix of progress and inertia. Despite updating NNPC’s organizational framework and launching significant initiatives, his time as leader was clouded by unclear practices related to subsidies, decreasing petroleum production, and financial losses. The change indicates President Tinubu’s intention to adopt fresh strategies within Nigeria’s oil industry, placing Bayo Ojulari in charge of tackling these long-standing issues.

Although Kyari advocated for organizational change within the PIA, his failure to rehabilitate refineries and guarantee transparency in agreements such as Dangote’s casts doubt on his legacy. His replacement, Bayo Ojulari, will have to tackle these outstanding problems to rebuild trust in Nigeria’s petroleum industry.

The upcoming NNPC CEO needs to focus on transparency, combat oil theft, and secure profits to validate the firm’s commercial orientation. Kyari’s tenure will be recalled for his significant changes as well as the ongoing challenges that remained during his leadership.