Unbundling or Restructuring: Much Ado about Nothing

By Olatunji Oginni

Since the Minister of State for Petroleum and Group Managing Director of the Nigerian National Petroleum Corporation announced the plan to unbundle the NNPC there have been numerous comments and critiques trailing the plan. Firstly, the members of both the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) embarked on a nationwide strike (which has since been called off) in protest against the unbundling of NNPC.  Secondly, the House of Representatives equally opposed the GMD’s plan on the ground that the unbundling or restructuring exercise would amount to an usurpation by the minister of the powers conferred on the Legislature by law. The GMD has since stated that he was misunderstood and that his intention was a restructuring not an unbundling. Nevertheless, are they different and do they have different legal consequences? This article will address some of the issues arising from the proposed unbundling/restructuring exercise of the NNPC.

In general business terms, unbundling is the process by which a large company with several and or different lines of business retains one or more businesses and disposes or transfers its remaining assets, product/service lines, divisions or subsidiaries. The ultimate goal of the unbundling process is to create a better performing company or companies. An exception to this is the case of government-forced unbundling, which may be as a result of ensuring competition or any other public interest reason. An example is that which happened in the banking sector. Restructuring on the other hand is a significant modification made to the debt, operations or structure of a company. This is usually done when there are significant problems in a company, which are causing some form of financial harm and putting the overall business in jeopardy. The hope is that through restructuring, the company will eliminate the financial harm and improve the business.

Is there a difference between the two? Yes and No. Yes in the sense that, from previous experience with regards to the power sector, it appears that an unbundling will mean a total re-organisation of the institutional framework of the oil and gas sector while No in the sense that both of them are means by which the NNPC will reposition itself to be more efficient and profitable. Indeed, it may be argued that a restructuring is a preliminary exercise to an unbundling. The plan is not to carry out a complete reorganisation of the institutional framework of the oil and gas sector in the same way that was done in the power sector but to improve the NNPC’s operations. Thus, the reorganised NNPC now has seven divisions comprising the Upstream, Downstream, Refining Group, Midstream, Finance, Ventures and Services groups headed by Chief Executive Officers.

The other issue to consider is whether the GMD of NNPC is even empowered to carry out such a restructuring or ‘unbundling’ exercise. The House of representatives had condemned Dr Kachikwu stating that “instead of embarking on an unconstitutional journey, the President should send an executive bill to the National Assembly as soon as possible if he had the intentions to unbundle the NNPC or carry out fundamental restructuring or reforms in the oil and gas sector and not for the minister to usurp its functions”. The starting point to finding an answer to that question would be the NNPC Act; section 5(2) of which states as follows: “It shall be the duty of the Corporation, from time to time, when the President so requires or the Corporation considers it appropriate, to undertake a general review of the affairs of the Corporation and of any subsidiaries thereof for the purpose of determining how the management of the activities of the Corporation or any subsidiary thereof can most efficiently be organised and, where appropriate, to make a report to the President upon the Corporation’s conclusions arising from the review”.

In addition section 6(1)(d) of the same Act grants the corporation the power to“establish and maintain subsidiaries for the discharge of such functions as the Corporation may determine”. In my opinion, inherent in such a discretionary power to create a subsidiary would also be the corresponding power to wind up and or transfer the assets and liabilities of such a subsidiary if the Corporation feels the need so to do. Thus the unbundling or restructuring exercise if it would involve the sale or winding up of a subsidiary like, for example, PPMC would be on solid legal grounds.

In conclusion, it can be stated that the NNPC has the power to carry out a restructuring and or even unbundling of its operations so long as that restructuring or unbundling relates to the internal reorganisation of the NNPC and does not entail the winding up of the NNPC itself or wider reforms in the oil and gas sector.


Olatunji Oginni is an Associate at Perchstone & Graeys, a leading commercial law firm in Nigeria. He specializes in advising clients doing business in the Energy, Natural Resources, and Banking & Finance Sectors. He is also a member of the Nigerian Bar Association Section on Business Law Research and Publicity Committee. He can be reached at olatunjioginni@perchstoneandgraeys.com.

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