LONDON, NOVEMBER 11, 2016 – Nigeria outlined a plan to overhaul state oil company NNPC and eventually list it on the stock exchange in a bid to modernise and streamline an industry known for graft and mismanagement.
The ministry seeks, in the proposal, to end the OPEC member’s reliance on oil exports and shift to a “gas-based industrial economy,” and said Nigeria 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 2 million barrels a day, Nigeria wants to transform NNPC from an 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 West African nation has been mulling a sale of oil assets to raise hard currency as a slump in vital oil revenues has eroded 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 foreign investors worried about a new currency devaluation have exited the Nigerian bourse.
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.
“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.