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 marked by both progress and standstill. This shift represents a new chapter following Kyari's ambiguous period of transformation and inertia.

In July 2019, Mele Kyari, who previously served as the Group General Manager for Crude Oil Marketing at NNPC and holds a degree in geology, was selected as the Group Managing Director by ex-President Muhammadu Buhari. Following the enactment of the Petroleum Industry Act (PIA) 2021, his leadership witnessed NNPC evolving from a government-operated entity into a profit-oriented limited liability firm. During this period, he also advanced to hold the title of Group CEO post-incorporation.

Key Highlights of Kyari’s Leadership

Enactment of the Petroleum Industry Act (PIA) 2021

Kyari managed the transformation of NNPC into NNPC Ltd., a business-focused organization, as required 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, with daily production surpassing 1.8 million barrels per day (bpd) at the beginning of 2020. However, this rise was followed by a significant drop because of oil theft and sabotage of pipelines.

Dangote refinery agreement along with modular refineries drive

Kyari struck a deal for crude supplies with the Dangote Refinery, aiming to decrease Nigeria’s reliance on imported fuels. Additionally, he backed small-scale refinery initiatives to enhance 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, an ambitious initiative designed to enhance gas shipments to Europe.

Automation and Transparency Measures

Kyari implemented digital monitoring systems to combat crude oil theft and released the first-ever audited financial statements of the NNPC for the years 2018 through 2020. However, skeptics raised doubts about the thoroughness of these reports.

Low Points and Controversies

No Transfers to Federation Account (2020-2022)

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

Petroleum Subsidy Mismanagement

Under Kyari, subsidy disbursements increased dramatically from ₦154 billion in 2019 to more than ₦4 trillion in 2022, depleting government resources. The NNPC’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-breaking heights, causing Nigeria to lose approximately 400,000 barrels per day at its zenith in 2022. Consequently, this resulted in a decline in production down to as little as 900,000 barrels per day, significantly affecting revenues.

Debated Oil Drilling Ventures in the Northern Regions

Kyari advocated for oil drilling activities in the northern region, with special emphasis on the Kolmani River initiative. This proposal was largely viewed as politically motivated rather than driven by economic feasibility because of the limited 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 issues within the distribution system.

Suspicious Inspections and Incomplete Openness

Although Kyari attempted to disclose NNPC’s financial records, audits uncovered significant deficits (₦803 billion in 2018 and ₦1.7 trillion in 2019), sparking worries about the company’s financial prudence.

Unsuccessful Overhaul of NNPC Refineries Despite Significant Investment

One of the most contentious issues during Mele Kyari’s term was the **ineffective revitalization of Nigeria’s government-run refineries**, namely those in Port Harcourt, Warri, and Kaduna, despite substantial financial investments running into billions of dollars.

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

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

Warri and Kaduna refineries are also shut down:

Rehabilitation initiatives for the Warri ($1.2 billion) and Kaduna refineries were also unveiled, yet they failed to produce tangible outcomes. Consequently, Nigeria persisted with costly fuel imports, which burdened the country with substantial subsidy expenses.

Refinery Non-Operational for Five Years:

Even with Kyari’s reassurances, none of the refineries restarted operations during his tenure, which sparked doubts regarding fund management and the authenticity of the restructuring efforts.

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 Africa’s biggest refinery, as part of a strategy to ensure a stable domestic fuel supply. Nonetheless, disputes quickly arose over this development.

Real Stakes Apparently Less Than Advertised:

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 merely for 7.2%, equivalent to $1 billion, along with an extra $36 million in expenses. These payments were facilitated via a $1.036 billion loan obtained from Lekon Refinery Funding Limited.

Is Debt Financing Preferable to Direct Investment?

Certain reports indicated that NNPC’s "investment" was set up as an oil-backed loan instead of a direct equity acquisition. This implies that Nigeria could still face potential repayment risks rather than gaining complete access to profits.

Crude Supply Dispute: Can NNPC Ensure Reliable Feeding of Dangote Refinery?

The Dangote Refinery was designed to run on Nigerian crude, but NNPC’s ability to supply feedstock has been questioned due to:

Nigeria’s Declining Oil Production:

As crude production has dropped beneath 1.4 million barrels per day (falling well short of the OPEC target), there are worries that NNPC might find it difficult to fulfill both its delivery commitments to the Dangote Refinery and its export agreements simultaneously.

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 argue that NNPC’s deal with Dangote Refinery disproportionately benefits a private entity while failing to revive Nigeria’s own refineries, raising questions about fairness and national interest.

A Mixed Legacy

During Mele Kyari’s term, the Nigerian National Petroleum Corporation (NNPC) experienced both progress and setbacks. He revamped the company’s organizational framework and launched significant initiatives; however, his time as leader was marred by unclear practices related to fuel subsidies, decreasing crude production levels, and financial losses. The decision to replace him reflects President Tinubu’s intention to steer the country’s petroleum industry towards fresh reforms, entrusting Bayo Ojulari with the mission to tackle these persistent issues.

Although Kyari advocated for corporate reform 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 incoming NNPC CEO should focus on enhancing transparency, combating fuel theft, and maintaining profitability to align with the firm's commercially oriented standing. Kyari’s tenure will be noted for his significant changes as well as the ongoing challenges that remained during his leadership.