The Central Bank of Nigeria governor, Godwin Emefiele, has advised the president-elect, Muhammadu Buhari, to consider selling off nearly half of Nigeria’s Joint Venture equity with multinational oil companies, to enable the new government raise a huge balance for immediate developmental projects.
If Mr. Buhari accepts the advice, Nigeria stands to generate about N14.9 trillion, about three times the country’s annual budget, which should be immediately ploughed into providing badly needed infrastructure development.
The Nigerian economy has faced continued pressure from spiralling debts, in the face of dwindling revenues resulting from falling global crude oil prices.
Many of the 36 states of the federation are barely able to meet their obligations to contractors and workers from their monthly allocations from the federation account. Foreign reserves slumped to about $29.9 billion as at March ending.
The CBN governor said the incoming administration should give serious thoughts to the proposal for Nigeria to scale down its majority stakes in the joint ventures currently with various multinational oil companies in the country.
The Nigerian National Petroleum Corporation currently holds, on behalf of the Nigerian government, at least 55 per cent equity in the joint ventures with Shell, ExxonMobil, Chevron, Total, Nigerian Agip, and Pan Ocean.
The partnership means for each daily production of oil in Nigeria, the government receives 55 per cent after production cost had been deducted.
Mr. Emefiele wants government to shed at least 25 per cent of that equity to raise some emergency funds for infrastructure development in key sectors of the economy.
The CBN governor said relevant officials in the Bank have already been directed to evaluate prospects of the proposal to see how it could be realized from the JVs, which account for more than 50 percent of Nigeria’s daily average oil production of 2.3 million barrels.
Mr. Emefiele told the Financial Times of London that the outcome of the study would be presented to Mr. Buhari when he assumes office on May 29.
The governor expressed confidence that Nigeria may rake in about $75 billion (about N14.93 trillion) if the government agrees to cut its JV equity to only 30 per cent.
Private equity companies, he said, could be encouraged to take over the relinquished government stakes and compete with the oil companies, to contribute to the development of the industry.
Part of the proceeds from the equity sale, Mr. Emefiele said, could be utilized in rebuilding macroeconomic buffers in the economy through investments in transport and energy developments projects to grow the economy and create jobs.
He said the government could adjust upwards, petroleum profit tax payable by the oil companies, to compensate for the reduction in government’s equity.
The equity cut back proposal, the CBN governor explained, was one of the most attractive options available in view of the impact of the drastic drop revenue earnings in recent times and the need to avoid piling up more debts.
While Mr. Emefiele’s proposal could meet stiff resistance from oil firms, politicians and their allies dependent on oil resources for patronage, the idea would likely be welcomed by others who support the idea of unbundling the NNPC and curbing corruption by allowing private participation in the sector.
For years Nigeria’s oil production has stagnated at about 2 million barrels daily average due to several factors, including the failure to pass the Petroleum Industry Bill.
During his campaigns, Mr. Buhari gave a hint as to hat his administration would do after resumption of office on May 29.
“Our manifesto says we are going to break up the NNPC,” he suggested, “but the ultimate answer may well be to divest the whole thing. It is an idea that will be seriously looked at.”
Mr. Buhari, however, said the immediate priority of his administration would be to get the industry back to a position where revenues that belong to the people are getting into the federation account by stopping the leakages, which is costing the nation billions, if not trillions, of naira..