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As part of the Federal Government’s efforts to revamp the legal, economic and governance framework of the petroleum industry in Nigeria, President Muhammad Buhari recently signed into law the Petroleum Industry Act (“PIA” or the Act”) after many years of political and other intrigues which had frustrated the efforts of past regimes in providing the much-needed reforms in this mainstay sector of the Nigerian economy.

One major highpoint of the Act is the conversion of the Nigerian National Petroleum Corporation (“NNPC”) from a statutory agency into a private limited liability company to be known as NNPC Limited (“the Company”), with ownership of all shares in NNPC Limited vested in the Government at incorporation. The Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated hold the shares in equal portion on behalf of the Federation and the nominal value of shares to be allotted at incorporation shall be determined by the Minister of Petroleum in consultation with the Minister of Finance, as the Government is mandated to subscribe and pay cash for the shares.[1]

The PIA has put NNPC on the route to its long-term goal of becoming a fully or partially commercialized, and privatised entity – hopefully, with greater efficiency and more transparent management.[2] It is expected that NNPC Limited will offer its shares to the public via an Initial Public Offering (“IPO”) and such transfer to the public must be approved by the Government and endorsed by the National Economic Council on behalf of the Federation. Any such transfer of NNPC Limited shall be at a fair market value and subject to an open, transparent, and competitive bidding process.[3] This article seeks to review the options open to the NNPC Limited in the process of commercialization and going public as a company. We consider the approach adopted by Saudi ARAMCO and recommend what Nigeria can learn from the process to make NNPC Limited’s prospects of becoming a public company similarly successful.

Justification for and Background to Privatisation of the NNPC

Right from inception, NNPC as the Nigerian national oil company has been plagued with issues of corruption, bureaucracy, lack of transparency and lack of profitability in the conduct of its business. Political influence and interference in the activities of the corporation had hampered it from growing into a world class oil company like its contemporaries around the world, which are known for facilitating the development of the oil industry in their home countries.

Hence, the PIA has designated NNPC Limited and its subsidiaries to conduct their affairs on a commercial basis in a profitable and efficient manner without recourse to government. The Act provides that the Company’s Articles of Association shall state these restrictions and it shall operate as a fully private entity regulated by the Companies and Allied Matters Act (“CAMA”), declaring dividends to its shareholders and retaining 20% profits as retained earnings to grow its business.[4]

The privatisation of NNPC is expected to increase the revenue base of government as the PIA has mandated that where the NNPC Limited has a participating interest or 100% interest in a lease or licence, NNPC Limited shall pay its share of all fees, rents, royalties, profit oil shares and taxes and any other required payments to government as a company.[5]

This signals a clear departure from the previous operation of the NNPC at a loss despite the huge investment of public funds into it, coupled with secrecy around its financial records for a long time. The new structure of NNPC Limited is intended to boost the confidence of investors in the sector, encourage them to invest much needed capital in the sector and acquire shares in the Company when its IPO is announced to the public. Funds generated from sale of its shares will be used in the diversification of the economy and for provision of much needed infrastructure in the country.

The Structure of NNPC Limited

The Act provides that NNPC Limited shall have a Board which shall perform its duties in accordance with the Act, CAMA and the Articles of Association of the Company. The Board shall be appointed by the President and composed of:[6]

  1. A non-executive Chairman;
  2. Chief Executive Officer;
  3. Chief Financial Officer;
  4. A representative of the Ministry of Finance not below the rank of Director; and
  5. Six non-executive members with at least 15 years post qualification cognate experience in petroleum or any other relevant sector of the economy.[7]

The Board shall also ensure that the Company’s annual audit is conducted by an independent, competent, experienced, and qualified auditor. By section 65 of the Act, NNPC Limited shall adopt the Incorporated Joint Venture Company (“IJVC”) model for its operating agreements with partners. In the same vein, the IJVC shall be an independent entity with strong commercial orientation and transparent operations as its focus as against the hitherto opaque government institution it was.

To assuage the concerns of the Organised Labour on the fate of the employees of NNPC, the Act provides that employees of NNPC and its subsidiaries shall be deemed to be employees of NNPC Limited on terms and conditions not less favourable than that enjoyed prior to the transfer of service and the terms of engagement shall be deemed to be service for employment related entitlements as specified under any applicable law.

The Route open to NNPC in going public

An IPO is seen as the default way to go public for a company. This is the process of offering shares of a private company to the public in a new stock issuance, thereby raising capital and listing the company’s shares on a stock exchange in the process. NNPC Limited as an Issuer is required to publish a prospectus in connection with the IPO, which shall be filed with the Securities and Exchange Commission (SEC) as part of the registration statement, either electronically or in printed form.[8]

An IPO is the better option for NNPC for a number of reasons. Firstly, an IPO would put the NNPC on a bigger international stage, especially if the valuation is high. Also, an IPO would raise significant capital for the Federal Government of Nigeria, which can both strengthen the country’s finances and be used to diversify the Nigerian economy.[9]

Furthermore, an IPO as a means of divestment will ensure transparency as the process opens up the investment opportunity to all interested persons (individuals, corporate/institutional), and reduce the possibility of the political class or related parties securing interests to the detriment of the general public or non-partisan interested investors/buyers.

Approach adopted by Saudi ARAMCO in going public

In 2019, Saudi ARAMCO, the state-owned oil firm of the Kingdom of Saudi Arabia (“Saudi”), went public with a record international initial public offering.[10] The remarkable success of the Saudi ARAMCO’s IPO changed the perspective of the managers of many state-owned oil companies and their governing officials. The IPO was made on the Saudi Stock Exchange, Tadawul, and Saudi Arabia raised more than US$29bn with the oil giant Saudi ARAMCO, being valued at US$1.7 trillion.

The Saudi Crown Prince Muhammad bin Salman (“MBS”) created the MBS strategy to IPO’ing a state oil company. The first step of his three-part plan was for the State to create a stir about growth and activity in the country — best underwritten by a long-term growth strategy for the country (i. e., 2030 Vision for Saudi Arabia). Secondly, new leadership was appointed to establish direction and leadership for the company. Prior to the IPO, MBS appointed a new chairman for the company and a new oil minister. Thirdly, a valuation number was planned and set up which created a discussion around the value of ARAMCO’s shares. The plan was that this would (and it did) help to attract big investors such as multinational banks. The well-planned strategies worked successfully.

What Nigeria can learn from Saudi ARAMCO going public

Clearly, NNPC and ARAMCO are not on the same financial footing. Thus, NNPC requires a more strategic approach with its valuation. NNPC has been making significant losses and its financial records show that its major losses are the result of challenges at its subsidiaries, in

particular the refineries.[11] Furthermore, the Nigerian Oil and Gas industry is going through tough times (including project funding issues too) which will impact NNPC and its efforts to

commercialise and go public. Thus, the strategy must be well thought-out going forward and involving professional advisers from the start will be critical to success.

Another strategy NNPC could adopt from ARAMCO’s experience is to tap into the local equity market with a well thought-out and compelling marketing strategy. ARAMCO did this using social media, billboard advertisements etc. This attracted wealthy investors, which no doubt helped to boost the IPO of the company.

The Saudi Central Bank also supported the process by doubling leverage limits for retail investors buying shares in ARAMCO. Wealthy Saudi businesspeople felt compelled to participate in the IPO which clearly helped the IPO by enticing more retail investors to join the offering. This is particularly important as local risks are better appreciated or accepted by local investors.

Just like ARAMCO, NNPC Limited will need to fix the challenges of its subsidiaries, bureaucracy and bloated costs associated with running the country’s refineries which has accounted for major losses in its financial record needs to be resolved. NNPC as a public listed company would have shareholders who will want to see more modernisation of strategies and assets for the company. Tapping the international debt capital market is an option for funding the necessary changes.

To achieve long-term profitability and increased contribution to the sustainable development of the country, NNPC Limited needs to reform the scope of its operation. This will entail diversifying its operations, limiting political interference in the entity, and giving it the mandate to be the bedrock of national development. The management team of the NNPC (now transited to the management of the NNPC Limited) have been talking IPO in recent times. We believe the team leading the transition has a full grasp of the issues, processes and dynamics of the Nigerian oil and gas economy. However, Government may need to add professionals with hands-on private-sector background and experience into the team to engender a more believable mindset towards the process of NNPC Limited going commercial and public like ARAMCO.

Furthermore, enhanced transparency and accountability in the activities of NNPC Limited is another takeaway from the ARAMCO experience that the Company must imbibe. Just like NNPC, ARAMCO used to be a deeply secretive organisation. However, following its IPO in December 2019, it released its production and profit report for the first time in its history. Following in such footsteps by embracing greater disclosure and accountability, will inevitably endear NNPC Limited to would-be global investors in the event of an IPO.


In conclusion, Nigeria would no doubt, be better served by adopting the strategies implemented by Saudi ARAMCO which we have discussed above. However, the approach should be tailored to fit the NNPC situation for its IPO to be a successful one.

Remarkably, the Federal Government by its recent actions has demonstrated its commitment to the restructuring of the oil and Gas industry pursuant to the provisions of the PIA with the recent incorporation of the NNPC Limited as a private company and the formation of the inaugural Board of the Company as well as officially scrapping the Department of Petroleum Resources(DPR), Petroleum Products Pricing Regulatory Agency (PPPRA) and the Petroleum Equalization Fund (PEF) as provided by the PIA.[12] Going forward, the Upstream Regulatory Commission (“NURC”) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (“NPRA”) will perform the duties of the scrapped agencies in a bid to ensure an effective regulatory framework for the industry. Like other commercial oil companies, it is expected that NNPC Limited will be subject to the regulatory procedures of NURC and NPRA.

This is a clear demonstration that the Federal Government is ready to provide the necessary support and political will to give full effect to the provisions of the PIA with the noble intention to make frantic reform of the petroleum industry with the aim of accelerating the economy with NNPC Limited positioned to play a leading role.

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Please note that this article is a general discussion of law and does not constitute legal advice. For further information on this article and area of law, please contact

Bukola Iji and Olaoye Olalere at: S. P. A. Ajibade & Co., Lagos by telephone (+234 1 472 9890), fax (+234 1 4605092) mobile ((+234. 809.990.0344, +234.815.979.4213) and (+234.815.979.4216, +234.802.371.4067) or email (; (

[1] Section 54(9) of the Act provides that the initial capitalization of NNPC Limited shall not be less than its financial requirements to effectively discharge its commercial role and deal with its obligations and liabilities. It has now been incorporated at CAC with N200b share capital, highest capital ever of any company.

[2] See our discussion of this in “Salient Statutory and Institutional Changes to the Nigerian National Petroleum Corporation Under the New Petroleum Industry Act 2021“ at and at See also “Behold The Brand New Nigerian Petroleum Industry Act 2021” at and at accessed 22nd October 2021.

[3] Section 53(5 & 6) of the PIA.

[4] Section 53 (7) of the PIA.

[5] Section 53 (8 of the PIA.

[6] Section 59(2) of the PIA. Now appointed, Sections 61 and 62 mandates members of the Board of NNPC Limited to discharge their responsibilities in accordance with the highest standards, practices, and principles of corporate governance.

[7] The provisions of the section shall apply where NNPC Limited remains wholly owned by the Government and upon full privatization, the Board composition shall be determined by the shareholders in accordance with the provisions of the CAMA and the Articles of Association of the Company.

[8] See accessed 22nd October 2021.

[9] accessed 22nd October 2021.

[10] accessed 22nd October 2021.

[11] Ibid, 3.

[12] accessed 22nd October 2021.

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