Kachikwu proposes financial independence for NOC

AS part of the planned restructuring of the Nigerian National Petroleum Corporation, Minister of state for Petroleum, Resources Ibe Kachikwu has recommended for the establishment of a state-owned National Oil Company (NOC) which is able to operate without recourse to the treasury.

Kachikwu is advocating the creation of an NOC as a holding company for an integrated operation on a fully commercial basis in the reforms.

“Our recommendation is that there should be an explicit provision in the Bill that clarifies that the National Oil Company shall cease to be funded from the federation account and shall have the power to raise funding for its operations from the debt and capital markets,” the minister disclosed at the weekend during a Senate public hearing on the Petroleum Industry Governance Bill (PIGB).

He said this would be done in such a way that funds which could otherwise be sequestrated for upstream commitments can be deployed by the treasury to meet urgent needs in other social sectors.Ultimately, the National Oil Company needs to acquire an investment grade status if it is ever to achieve these objectives.

“For one, it must be insulated from political interference in its operations. It must also run commercially and efficiently if it is to be able to attract funding from debt and capital markets. The governance structure and terms of reference must therefore be clearly stated and legislation must provide it a pathway to independently and sustainably raise its own funding.”

On Governance, Kachikwu is proposing that the NOC which should be structured as a holding company to be chaired by the Minister.He further suggests the NOC to be an integrated holding company comprising semi independent upstream, midstream and downstream with their own CEOs and Board of Directors.

Also as part of his recommendation, he said the CEO / GMD of NOC should also be appointed by the President upon the advice of the Minister as he seeks such position to be tenured but subject to fulfillment of annual Key Performance Indicators and targets to be set by the board.

The minister is further seeking that CEO / GMD of the Holding Company may only be removed for failing to fulfill KPIs and for misconduct.

Another recommendation by Kachikwu is that Stock exchange governance rules should apply to the NOC immediately it is incorporated right up till when it is eventually listed.”As for the subsidiaries, similar rules relating to governance and funding should apply, the main difference being that the Group Managing Director should chair the board of each subsidiary.”

“We also support the creation of an asset management company that will manage government’s interest in specific upstream assets that will be transferred to the company, whilst leaving the National Oil Company to operate as a refocused integrated company,” the minister added.