I am most uncomfortable with mortgaging Nigeria's future via a knee jerk response to current financial challenges that oil producing and exporting countries such as Saudi Arabia, Russia, Venezuela, Nigeria and Mexico are facing due to significant drop in oil prices (over 45 % drop) over the past year. The oil prices are expected to return to respectable levels of greater than $75 per barrel within the next two years as some oil experts have suggested.
Ar this time, Nigeria cannot afford to sell its major foreign revenue generating assets at this time. Selling off oil assets to reduce Nigeria's oil equity to that of a minority share in the oil joint venture partnerships would be tantamount to selling off Nigeria's future. If and when the 15 trillion nairas are exhausted, my optimistic estimate would be less than two years, it would leave Nigeria with significantly diminished annual revenues of less than 50 % of current from our oil assets. We cannot and should not make such a decision at this time. We have the responsibility to ensure that millions of current and future generations of Nigerians are not reduced to a life of everlasting impoverishment and with no hopes. We should also be fully reminded that the population of Nigeria is projected to be 246 millions by 2030, about a 45 % increase over current! Nigeria would surely need its oil revenues then and beyond.In terms of "unbundling" or the divesting of NNPC assets, the decision to actually divest a specific asset should be entered into after rigorous evaluation of current and future impacts on the national economy and the people of Nigeria. Certain assets can be possibly unbundled such as those that relate to oil refining, petrochemical plants and other national agencies, and those should be executed after appropriate necessary studies.
Most of the other affected oil producing countries, and notably Russia, have responded aggressively by shoring up their monetary reserves and currency via prudent short term fiscal actions such as bond auctions, increasing the cost of borrowing money and tax revenues. Nigeria should exhaust appropriate fiscal remedies before contemplating and making plans to sell the country's major oil assets. The options should include steeply graduated taxation rates with none for people of low to middle income, cleaning up the fuels subsidy program, increasing interest rate on loans and exploring other ways to increase revenue.
As Nigerians, we are reminded of many multi-billions dollars projects and their related scandals over the past decades including "Nigeria content" in oil exploration and production (E&P), oil blocks allocations, etc., that have not translated in any noticeable measures to upgrading the lives of millions of Nigerians via education, reduction in the rate of job unemployment, health benefits and general improvements in the quality of life. Infrastructures have not been fully developed as we all know, and an infusion of 15 trillion nairas may also go the way of previous wastage of the national monetary reserves.
Before, Nigeria embarks on any more multi-billions dollars projects and/or any financial recommendation to sell the nation's assets, we would need to get our "house" in order with respect to endemic corruption and with respect to inculcating true sense of nationalism and respect for current and future Nigerians. We have to truly practice loving our neighbors, that is our Nigerian citizens, as ourselves.
Thank you and have a pleasant day..
Dr. Soni O. Oyekan
President,
Prafis Energy Solutions
Richmond, TX.
On Thu, Apr 23, 2015 at 4:14 AM, Kola Fabiyi <fabiyi@live.com> wrote:
Revenue Decline: Sell Nigeria's oil stakes, raise N14.9trillion, CBN governor tells Buhari
by Premium Times
Premium Times / 2015-04-23 10:07
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.
Though Mr. Emefiele's proposal could meet stiff resistance from oil firms, politicians and their allies dependent on oil resources for patronage. However, the idea would 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..
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