In a recent quarterly report published on Monday, the Nigerian National Petroleum Company (NNPC) Limited announced that it has missed the deadline for the launch of its highly anticipated initial public offering (IPO).
The national oil company underwent a significant transition on July 19, 2022, when it transformed from a state-run oil corporation into a commercial venture, in accordance with the provisions of the Petroleum Industry Act (PIA).
At the time of the transition ceremony, Mele Kyari, the Group CEO of NNPC, had stated that the company would be ready to launch its IPO by mid-year 2023.
An IPO is a public offering in which shares of a company are sold to institutional investors.
However, as we enter the third quarter (Q3) of 2023, the IPO is yet to be launched, causing disappointment among industry observers. The quarterly report indicated that NNPC was expected to be IPO-ready by the end of the second quarter (Q2), but it seems the company has encountered hurdles in meeting this timeline.
According to the report, NNPC Ltd is currently focusing on thoroughly cleaning up its books to ensure proper recapitalization before proceeding with the IPO. The PIA stipulates that NNPC Ltd must be in a position to consider an initial public offering three years after the transition.
“NNPC Ltd is making a deliberate effort to properly clean up its books towards recapitalization,” the report reads.
“The PIA provides that NNPC Ltd will be in a position to consider any initial public offer (IPO) in three years’ time.”
The company said it understands that when “you want to get ready for IPO, you need to do things differently”.
“You need to get your books correct. You need to recapitalize and shape your portfolio,” NNPC said in the document.
“With the declaration of profit-after-tax for the financial years 2020 and 2021 (and with 2022 coming up soon), NNPC Ltd is currently in good stead for an IPO declaration.
“Fingers crossed, NNPC will be IPO-ready by the second quarter of 2023.”
Once the IPO is eventually floated, it will provide an opportunity for interested individuals to own shares in NNPC Ltd. This move aims to increase transparency and public participation in the country’s oil and gas sector.
The quarterly report also outlined NNPC’s plans for its retained earnings and revenue generation. The company intends to retain 20 percent of its profits to reinvest and expand its business operations
NNPC would also charge a fee for tasks carried out at the request of the Nigerian Upstream Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), it added.
Additionally, NNPC will charge fees for tasks undertaken at the request of regulatory bodies such as the Nigerian Upstream Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
The publication further highlighted that NNPC Ltd will earn a management fee of 30 percent of profit oil and gas from production sharing contracts (PSCs). Furthermore, the company will have the option to raise funds through loans, bonds, and various financial instruments.
As the eagerly awaited IPO remains on hold, stakeholders and potential investors eagerly await NNPC’s successful completion of its preparations for the public offering, which is anticipated to revolutionize the oil and gas industry in Nigeria.
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