FG Unveils Plans To Overhaul, Sell Stake In NNPC

FG Unveils Plans To Overhaul, Sell Stake In NNPC

The Federal Government, on Friday unveiled a proposal to overhaul the operations of the Nigerian National Petroleum Corporation (NNPC), preparatory to divesting some of its stake and eventually listing it on the stock exchange.
The move will see government modernising and streamlining the corporation for efficiency and transparency may be partly responsible for the monthly publication of the management report of each subsidiary.
The draft released late Thursday by the Federal Ministry of Petroleum Resources will also see the corporation becoming competitive, just like other state oil corporation such as Brazil’s PetroBras.
The ministry seeks, in the proposal, to end Nigeria’s reliance on oil exports and shift to a “gas-based industrial economy,” noting the need to reform its oil sector or risk output falling.
The latest move may have followed the failure of the National Assembly to pass the much awaited Petroleum Industry Bill (PIB) after almost 16 years of back and forth movement.
“Unless there are additions to reserves and those reserves are brought into production, Nigeria can expect to see absolute declines in production from around 2020,” the plan said.
As a key step to improve crude output of around two million barrels a day, the Federal Government hopes to transform NNPC from a bureaucratic empire where little work gets done into an entity functioning like the private sector.
“NNPC will be made autonomous from the state, it will relinquish all its policy making and regulatory activities, and it will be treated on an equal basis with private sector operators for projects,” the draft said.
The proposal said a newly formed corporation could sell stakes “so long as the government shareholder retains effective control and ownership.”
The listing itself is unlikely to happen soon, notes Reuters.
The ministry said it will consult with lawmakers over the reform, but it faces serious challenges. Some members of parliament, including from the president’s All Progressives Congress (APC), have objected to government plans to sell oil and other assets to raise hard currency.
“It’s commendable that they have actually tried to make a petroleum sector policy,” said Aaron Sayne, senior governance officer with the Natural Resources Governance Institute to Reuters.
But he said the lack of details, specific targets and the backing of a broad coalition would make it difficult to achieve many of the aims.
“Where this is short on details is where the vested political interests are the strongest,” he said. “It’s not clear that it has the political support.”
The ministry’s draft proposes a similar approach to spur investment in the nation’s sclerotic refineries, allowing the closure or privatisation of them unless they can become profitable. It would also eliminate any remaining fuel subsidies and aim to deregulate fuel prices.
It also included placing more responsibility for oil spills and pollution on the companies operating them, including criminal “prosecutions of company directors where necessary.”
The issue is sensitive for oil majors operating in the Niger Delta oil hub where militants and villagers fight for a greater share of oil revenues and higher compensation for oil spills.