Re: USA Africa Dialogue Series - Revenue Decline: Sell Nigeria’s oil stakes, raise N14.9trillion, CBN governor tells Buhari

It is true that the public sector in Nigeria does not have enough revenues for the government to fulfill all its functions and do so effectively--and this would include providing social overhead capital (e.g., farm-to-market roads and other necessary infrastructures; health clinics, especially in the rural areas; schools, especially at the primary and secondary levels, etc.). Part of the problem comes from a relatively ineffective tax collection system in which many income earners either do not pay taxes or do not pay what they actually owe. Then, of course, there is venality in the public sector--high levels of corruption in the public sector means that a more important problem is poor and inefficient utilization of existing public revenue and not necessary the size of the revenue itself. Hence, even if the country liquidates its shares in the various joint ventures and does raise trillions of naira, the question is: Will the funds so acquired be used fully and effectively in productive pursuits or would they be corruptly allocated?

Finally, what does the law say about the decision by any governmental regime to unilaterally liquidate those assets? Can such a government legally dissolve such a trust instrument? 

On Thu, Apr 23, 2015 at 12:40 PM, Anunoby, Ogugua <AnunobyO@lincolnu.edu> wrote:

Who is this Central Bank Governor working for. Does he not know that the joint venture equity he refers to is held in trust for present and future Nigerians? Does he know why the stocks are held in the first place? Does he not know that this equity holding is what gives the Nigerian people, through their government, direct leverage on the running of the oil companies without legislation recourse in the first instance? If this is the best budget-funding advice the Governor has for the incoming central government, that government must seriously consider whether the governor is up to the job.
Does the Governor not know that Nigeria loses billions of naira in uncollected taxes? Has he considered improving taxation efficiency? What about ending corruption and waste in government?  What is his advice on those? Sell to who? The oil companies, international investors, rich Nigerians? Why does he believe that the proceeds of sale of the said equity holdings will not be frittered away and shared as others have before it? Where is the audit evidence that the projects he claims state governments are owing on are legitimate projects? If the incoming central government will be prudent as its supporters have claimed, this is a good time to borrow with the equity holding as collateral so long as the loan proceeds will be judiciously employed as a bridging loan to fund a short-term budget deficit and create an add value.
Is volunteering advice on sovereign corporate investing part of the governor's job before he is asked for it? Why disclose this information to the Financial Times and not a Nigerian newspaper? To which gallery was he playing?  Did he fall for a trick question? Like many before him, this governor seems to have drank the poison brew that causes some senior Nigerian public servants to place their country's true interest on the back burner, or even work against it as they try to raise their stock with western interests. With public servants like this governor, Nigeria should not worry about World Bank/IMF economists. There are locals prepared to do good hatchet jobs on behalf of western interests.

oa

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Subject: USA Africa Dialogue Series - Revenue Decline: Sell Nigeria's oil stakes, raise N14.9trillion, CBN governor tells Buhari


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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JOHN MUKUM MBAKU, ESQ.
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Graduate Certificate in Environmental and Natural Resources Law
Nonresident Senior Fellow, The Brookings Institution
Attorney & Counselor at Law (Licensed in Utah)
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