Dr Emmanuel Ibe Kachikwu

GMD, NNPC sees it as one of the best achievements he has made in his administration. Chengji! Nawa o!

STRONG indications emerged last weekend that an estimated 10,000 workers of about 500 NNPC Retail Limited, franchisees outlets across the country may soon lose their jobs over mounting debt profile and other bottlenecks militating against the state oil firm’s ongoing reform initiatives. The NNPC Retail Limited, a subsidiary of NNPC has been overseeing the operations of the franchise retailers since August 2002 at a cost which its current management considers unsustainable in the face of daunting challenges.

Group Managing Director of the NNPC, Dr. Emmanuel Ibe Kachikwu, who gave this hint at a meeting with Energy Editors in Lagos, attributed the impending closure of the franchise outlets to rising debt burden which the parent body can no longer shoulder in the face of its dwindling revenue.
He disclosed that while the franchise holders operate 500 stations, NNPC on the other hand has about 20 stations directly, lamenting that the affiliate stations have continued to enjoy some economies of scale and other benefits from the NNPC which it can no longer sustain.

But as part of plans to prune its operations to reduce cost, the NNPC boss has said it would no more be business as usual.

Kachikwu disclosed that the move had become expedient in the face of the unprofitable nature of the business entity.

He maintained that the corporation could no longer cope carrying on the huge financial burden of the retail outlets to the detriment of other businesses among the NNPC subsidiary companies.

A visibly worried Kachikwu explained that the 500 affiliate stations have consistently failed to pay for products supplied them by NNPC, hence the mounting debt profile, which has made the business unattractive.

“While I ran my own private business, operators made payments to me before products are supplied to them. I don’t need to even wait for their payments. They pay far ahead of supply. But in the case of the affiliate companies, the reverse is the case,’’ he lamented.

He said when he came on board he discovered that a lot of products disappeared along the retail value chain, while there are no attempts to recover some of the debts owed.

He said he has instructed that the credit time lines be reduced because it has been abused by the operators, while product delivery to affiliate stations would henceforth be on cash and carry basis in order to return to profitability.

“For now, we will be returning to our initial 20 fuel stations while we grow capacity gradually. The present affiliate arrangement is not working for the retail company. But we will keep working to come up with other sustainable options to keep the initiative moving,” he said.

But a former GMD of NNPC, Dr. Mohammed Sanusi Barkindo, had said NNPC was targeting 50 per cent ownership of fuel stations.

“In all developing countries, their national oil companies operate across the supply chain, including the strategic downstream sector and it is not only seen from commercial perspective but also from national security implications. You cannot handover that sector to a group of people, private individuals, who you cannot predict their political coloration, decision they may take and the implication of such decision,” Barkindo had said.

Reacting to the decision of NNPC to close the 500 retail outlets, a franchisee who pleaded not to be named for fear of victimisation said the threat by NNPC is good riddance to bad rubbish, insisting that it was the franchisees that are running the business at a loss.

“Despite several requests to the NNPC Retail Limited, the unit in charge of the transaction, for upward increase in profit margins, the management of the corporation is yet to accede to the request.”
He regretted that it had been very difficult to get the NNPC Retail Limited management to discuss final approval of the margin increase, adding that they have been operating at a loss since the partnership started.

If NNPC goes ahead with its decision to shut down about 500 retail outlets, more than 10,000 workers employed of the affected outlets will return to the labour market. decision to shut down about 500.

On the way forward, the GMD said the corporation will not be in any rush to sign on affiliates into its retail chain, but would rather take its time to steadily grow the 20 outlets that belong to NNPC.
Barkindo maintained that the move was informed by the determination of the corporation to break the monopoly that currently exists among the marketers who play key roles in the supply chain.

NNPC Retail Limited operations commenced in August 2002 when the first outlet was commissioned in Lagos to market petroleum products to the public.

NNPC’s entry into products retailing was initially a strategic move intended to provide the corporation with the vehicle for intervention in the market during emergencies and avoidable supply disruptions alongside a benchmark for key players in the distribution chain and ensure safe, orderly and profitable retailing of products in the country.

Part of the plan was also to transform the retail outfit into a vehicle to achieve NNPC’s world-class vision by integrating its upstream and downstream businesses in a similar manner to other national and international oil companies.

Today however, the story is different, as the retail arm of the business has become a cost centre rather than a profit centre.

But in a bid to return the NNPC Retail Limited back to profitability, Kachikwu, had in the first week of September said that the corporation would commence the unbundling of the Pipelines and Products Marketing Company (PPMC) into three different companies.

He made the disclosure during an official tour of the Okrika Jetty and the Port Harcourt Refining Company Limited shortly after assuming office.

He said that the PPMC would be split into a pipelines company that would focus primarily on the maintenance of the over five thousand kilometers pipelines of the corporation.

He explained that there would be a storage company that would maintain the over 23 depots and a products marketing company that would market and sell petroleum products.

Kachikwu said that the move would ensure that the right set of skills are rightly positioned and the number of leakages in terms of pipelines break and products loss are reduced to the barest minimum.
The GMD said that the ongoing phased rehabilitation of all the state owned refineries would be given an accelerated vigour with the aim of reducing petroleum products importation into the country.
He added that at full capacity, all the refineries could supply only 20 million litres of Premium Motor Spirit (PMS) otherwise known as petrol on a daily basis.

The NNPC boss assured Nigerians that the refineries would not be sold, adding that joint venture partners with established track records of success in refining would be invited to support the running of the refineries to ensure efficiency.