Nigeria May Sell Stake in State Oil Company in Industry Overhaul
Nigeria Oil Bill Makes Provision for NNPC Share Sale
(Bloomberg) -- A long-awaited bill that could reorganize the petroleum industry of Nigeria, Africa’s biggest crude producer, makes provision for a possible sale of shares in its powerful state oil company.
Draft legislation presented to parliament also suggests the Nigerian National Petroleum Corp. be independent of government, with no recourse to state funding. It seeks to establish “a commercially oriented and profit driven national petroleum company.”
Tightly controlled by the Nigerian government since it was established in 1977, the NNPC has become a tool for political patronage to cronies, with opaque transactions helping fuel corruption. The bill, in the works for two decades, is seen as a landmark for the administration of President Muhammadu Buhari, who’s in a strong position after his 2019 election victory packed parliament with his allies.
The NNPC generates about half of government revenue and more than 90% of Nigeria’s export earnings. Its National Petroleum Investment Management Services division, the company’s biggest revenue generator, reported income of 5.04 trillion naira ($13 billion) in 2018 and profit of 1.01 trillion naira, according to accounts published in June that were the first in its 43-year history.
Still, it’s dwarfed by Saudi Arabian Oil Co., the oil giant that listed in December and became the world’s most valuable company.
The proposed law isn’t as aggressive about privatizing the NNPC as a 2012 version of the bill: it omits a previous target date for selling shares and specifics on how much of a stake would be sold. But its submission to lawmakers demonstrates that the reformist camp in Buhari’s government is making progress with its agenda.
“This is a bill that comes with the authority of the presidency,” said Antony Goldman, founder and chief executive officer of Promedia Consulting, a political risk consultancy firm. It replaces an “outdated set of laws, layered one on top of each other since the 1950s, that are no longer fit for purpose,” he said.
The government would have to approve any plans to privatize the company, according to the bill. A sale or transfer of shares would be at a “fair market value and subject to an open, transparent and competitive bidding process,” it said.
Commercial Operation
The NNPC would be replaced by a limited-liability company known as Nigerian National Petroleum Co., that operates on a commercial basis. The state’s shareholding in the new entity would be held by the Finance Ministry.
The bill also provides for an annual audit of the new oil company by an independent firm.
Other Highlights of the Bill
- A provision for “unrestricted free-market pricing” of petroleum products, ending decades of government-subsidized gasoline.
- The establishment of a regulator to provide pricing and tariff frameworks for natural gas in midstream and downstream gas operations and petroleum products.
- Establishment of a midstream infrastructure fund to make equity investments in gas-related assets on behalf of the government.
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