Nigerian state-owned NNPC's ability to operate remains at risk given that the gap between its liabilities and assets widened further in fiscal year 2020, the firm's independent auditor Pricewaterhousecoopers (PwC) has said.
This may explain the recent slippage of a timetable to part-privatise the company.
NNPC's liabilities exceeded its assets by 4.6 trillion naira ($10.7bn) as of 31 December 2020, compared with N4.4 trillion at the end of 2019, according to its 2020 accounts. This indicates "a material uncertainty" that may cast "significant doubt on NNPC's ability to continue as a going concern," PwC said.
The gap widened even though NNPC made a profit last year for the first time in its 44-year existence. It swung to a profit of N287bn from a N1.4bn loss in 2019, which it partly attributed to cost-cutting measures and improved business efficiencies, including renegotiating contracts and implementing technological substitutes to replace travel.
In the same period, revenue fell to N3.7 trillion from N4.6 trillion, which NNPC attributed to a decline in production and crude prices caused by the effects of the Covid-19 pandemic.
PwC's concern is about NNPC cumulating recurring losses over several years, it said. But it pointed out that the Nigerian government is implementing mitigating measures and providing support to NNPC to ensure it has adequate resources to continue operating "for the foreseeable future."
One such measure is the Petroleum Industry Act (PIA), which became law in August after 14 years of legislative deadlock. The act restructures the country's oil and gas industry, improves transparency and governance and gives more NNPC autonomy.
The government is also working towards recapitalising NNPC, and plans a partial privatisation. But Buhari's recent enthusiasm for this to take place within six months of the PIA becoming law was tempered this week by NNPC managing director Mele Kyari, who told Bloomberg TV that the move is more likely to be at least three years away.
