The Chief Financial Officer of Nigerian National Petroleum Company (NNPC) Limited, Umar Ajiya, has indicated that the company is open to asset sales as a strategic move to enhance profit margins and achieve higher returns in the near future. Ajiya made this revelation during an interview discussing the 2023 audited financial statement of the oil company.
Ajiya emphasized that while NNPC aims to maximize the utilization of its assets, it is also contemplating the sale of assets that cannot be optimized for better financial returns.
“You have a company that is literally just one year old. We started on the first of July, 2022. 2023 marks our second year of operation,” Ajiya stated. “We are going to sweat the assets by bringing in partners to optimize them. We will also sell those assets that we think we cannot optimize ourselves. That way, we will rebalance the balance sheet in such a way that the assets are maxed out. We expect the rate of returns to be achieved.”
NNPC, which reported a 28% increase in profit, reaching N3.2 trillion, currently holds total assets valued at approximately N246.8 trillion, surpassing Nigeria’s entire Gross Domestic Product (GDP).
NNPC Ready for Public Offerings
Ajiya also mentioned that NNPC is prepared for public offerings, depending on shareholder interest. He explained that the Petroleum Industry Act (PIA) suggests a two to three-year financial history to assure investors of the company’s profitability before it becomes a publicly traded entity.
“To go public is essentially a shareholder’s decision. We are almost there in the sense that we have at least two or three years of financial history to demonstrate to the investors that the company is on a profitable trajectory. We’ve demonstrated that for the first two years. Hopefully, the shareholders will decide how much to sell down and unwind. It’s really the shareholders’ call.”
He added that shareholders are currently inclined to retain their stakes, preferring to see strong performance from NNPC before it enters the market as a publicly traded company. “The shareholders are now averse to selling down. They are eager to see us deliver with some strong performance, and they can ask us to enter the market at the appropriate time,” Ajiya noted.
Key Points to Note
- The recent audited financial report of NNPC has raised concerns about the company’s profit margins and the equity within its capital structure.
- Despite reporting a 28% increase in profit to N3.2 trillion in 2023, many analysts believe that NNPC has not yet fully optimized its assets and equity, which exceeds Nigeria’s GDP.
- NNPC has emphasized that, as a limited company operating for just two years, its profitability reflects a strong commitment to corporate governance, which has generated significant interest from potential investors and shareholders as it prepares to go public.
