- FG to Restructure Oil Sector, NNPC
The Federal Government has outlined a plan to overhaul the Nigerian National Petroleum Corporation and eventually list it on the stock exchange.
This is part of the government’s bid to modernise and streamline the oil sector, which has been known for corruption and mismanagement for many years.
The Ministry of Petroleum Resources released a draft late on Thursday to buttress the oil sector reform, Reuters reported on Friday.
Oil sector reform has been stalled for many years due to disagreements and political infighting over how best to manage the country’s oil resources.
In the proposal, the ministry is seeking to end the country’s reliance on oil exports and shift to a “gas-based industrial economy.”
The proposal posits that the country needs to reform the oil sector or risk output falling.
“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 is planning to transform the NNPC from a bureaucratic empire where little work gets done into an entity functioning like the private sector.
“The 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.
Nigeria has been mulling a sale of oil assets to raise foreign exchange as a slump in vital oil revenues erodes the budget.
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, as concerns over a new naira devaluation have made foreign investors to exit the Nigerian Stock Exchange.
The ministry said it would consult with lawmakers over the reform.
This may face some challenges as some members of the National Assembly, including from the Progressives Congress, have objected the government plans to sell oil and other assets to raise forex.
“It’s commendable that they have actually tried to make a petroleum sector policy,” a senior governance officer with the Natural Resources Governance Institute, Aaron Sayne, said.
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.
Shell, one of the largest international companies operating in Nigeria, Chevron, and ExxonMobil declined to comment on the plan. ENI did not immediately respond to a request for comment.