Amidst the challenging operating environment which has tested the resilience of institutions and businesses globally, the Nigerian National Petroleum Company Ltd has continued to weather the storm by posting its second consecutive year of profit of N674.1bn in the 2021 financial period.
The positive result is coming as global economies continue to struggle with the recessionary forces and weak economic outlook.
In spite of a tough and volatile operating environment, the NNPC Group’s investment strategy proved resilient and enabled the National Oil Company to deliver favourable outcomes as shown by the 2021 financial statement.
For instance, the NNPC Group which became a CAMA Company in 2021 following the implementation of the Petroleum Industry Act, grew its profit from N287bn in 2020 to N674bn in 2021.
The NNPC’s Group Account was audited by PriceWaterhouseCoopers, SIAO, and Muntari Dangana Accounting Firms.
The N674bn profit posted by the NNPC Group in the 2021 financial period represents an increase of N387bn or 134.8 per cent when compared to the N287bn recorded in 2020.
Announcing the result on Tuesday in Abuja, the NNPC Group Chief Executive Officer, Mele Kyari said, “Today I’m happy to announce that the Board of NNPC has approved 2021 audited financial statements and NNPC has progressed to a new performance level,from N287bn profit in 2020 to N674bn profit after tax in 2021,climbing higher by 134.8% YoY profit growth.”
The 2021 financial year made it the fourth consecutive years that the NNPC will be making its Audited Financial Statement public. This was one of the innovations made by Kyari when he took over the helms of affairs of the National Oil Company.
In 2018 when the NNPC first made public its Audited Financial Statement, it made a loss of N803.9bn.
Three components were responsible for the poor and worse performance of the Group ever. They were increase in cost of sales, specifically increase in crude cost; increase in the general and admin expense which almost doubled from ₦474bn to ₦894bn; and increase in impairment of receivables and other assets in the year by almost 300 per cent.
In 2019 when the NNPC Group Audited Account was released, the loss position had reduced to just N2.3bn.
But with the reforms implemented by the NNPC Boss, the loss position was reversed in the 2020 financial period when the NNPC posted its first profit in 44 years of N287bn.
Since then, the Company has bounced back to reckoning with impressive financial performance of N674bn in 2021.
The rise in profit is mainly occasioned by significant increase in revenue and less proportionate increase in cost of sales resulting to 1,556.9 per cent increase in gross profit.
Other factors that contributed to the high profitability of the NNPC Group is the outcome of the N173.7bn arising from reconciliation with Federal Inland Revenue Service (FIRS), stronger emphasis on performance management, rationalization of non-essential expenditure and implementation of the transparency and accountability agenda.
The impressive profit performance recorded by the NNPC was further bolstered by the positive impact of the N193bn royalty which was written back as a result of the reconciliation with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Similarly, the emplacement of aggressive cost control measures by the NNPC management as well as the successes made in the implementation of system-based controls on funds management also boosted profitability.
Further analysis of the NNPC Group Audited Financial Statement showed that revenue rose by 72.6 per cent to N6.42trn in 2021 as against N3.72trn in 2020.
The increase in revenue is attributable to improvement in the production and price of crude oil during the period under review.
The Audited Financial Statement further revealed an increase of 2.6 per cent in total assets from N15.86trn in 2020 to N16.27trn in 2021.
Through efficient management of the affairs of the company, the Audited Financial Statement also showed that total liabilities decreased by 8.3 per cent from N14.68trn in 2020 to N13.46trn in 2021.
In line with the growth trajectory of the current management, the shareholders fund position of the NNPC Group also followed an upward trend as it rose to N2.81trn in 2021 as against N1.15trn in 2020. This represents 144 per cent increase in shareholders fund as of December 31, 2021.
The cost of sales also rose by 46.3 per cent from N3.65trn in 2020 to N5.34trn in 2021. The increase in cost of sales is attributable mainly to the increase in crude oil production.
The selling and distribution expenses also increased from N36bn in 2020 to N52bn in 2021. This increase is in line with the rise in revenue from petroleum product cost during the year under review.
The net impairment loss on financial assets dropped to N65bn in 2021 as against the impairment reversal of N713bn in 2020.
Since he assumed office, Kyari has pursued his Transparency, Accountability and Performance Excellence (TAPE) agenda, a five-step strategic roadmap for NNPC’s attainment of efficiency and global excellence.
Kyari, during the inauguration, had said pursuing TAPE was the only way to turn around the corporation and make it competitive.
Under the roadmap, the Transparency component of the agenda was aimed at maintaining positive image, share values of integrity and transparency to all stakeholders, while the Accountability segment of the campaign is to assure compliance with business ethics, policies, regulations and accountability to all stakeholders.
In terms of the two-prong item of Performance Excellence, Kyari has said the idea was to entrench a high level of efficiency anchored on efficient implementation of business processes which would also emplace an appropriate reward system for exceptional performance among the workforce.