NIGERIA SELLS ASSETS
Nigeria's incoming government should consider selling down its majority stakes in joint ventures with multinational oil companies to shore up state finances and raise funding for infrastructure development, according to the central bank governor.
Godwin Emefiele has asked CBN officials to evaluate how much could be raised if the state-owned Nigerian National Petroleum Corporation substantially reduced its 55 per cent equity in the joint ventures — with Royal Dutch Shell, Chevron, ExxonMobil, Total and ENI — which pump about half of Nigeria's 2m barrels a day of oil production.
He believes that $75bn is a realistic target, and that private equity groups could be encouraged to compete with the oil companies for acquisitions to ensure the price is competitive.
Some of the proceeds could be used to rebuild macroeconomic buffers, damaged by the collapse in world oil prices and failure of the outgoing government of Goodluck Jonathan to save more when prices were high. But Mr Emefiele said a greater portion should be invested in transport and energy developments that would "grow the economy and create jobs".
"If you sell down a 30 per cent stake you could raise something substantial. It is an option they need to consider as a way of raising further funding," he told the Financial Times. He added that he had commissioned the research and would present the idea to president-elect Muhammadu Buhari when he assumes office on May 29.
"It is an option now because our revenues have dropped and we don't need to pile on more debt. The alternative is to look for ways of releasing value from some of the government's assets," he said, adding that petroleum profit taxes could be adjusted upwards to compensate for the state's reduced stake in crude oil sales.
Gen Buhari, who first governed Nigeria as a military ruler in the 1980s, was petroleum minister when the NNPC was created in 1977. Now 72, he became the first opposition candidate in Nigeria's history to unseat an incumbent president at the polls, sweeping to victory last month on the back of campaign pledges to stamp out corruption, defeat Islamist insurgents and create jobs, but the choices confronting him are stark. Africa's biggest economy is reeling from the collapse in the world price of oil which contributes around 70 per cent of state earnings. Federal revenues are roughly half what they were a year ago, many of the 36 states in the federation are struggling to pay salaries and foreign reserves this month dipped below $30bn, or around five months of import cover.
Mr Emefiele's suggested remedy could prompt opposition from those ideologically opposed to selling off state assets, and resistance from politicians dependent on oil resources for patronage.
But it will find sympathetic ears among the more liberal, market minded reformers in the administration in waiting. Some of them believe that the NNPC should be sold off altogether — both to eliminate associated corruption, and to help free up commercial oil firms to invest in new production.
For years Nigeria's oil production has been stagnating at around 2m b/d because of uncertainty around stalled reforms and because of the state's difficulties in raising its own share of development and maintenance costs.
Oil company executives argue that production could be almost doubled if the NNPC were commercialised or sold, and the companies freed up to meet the full cost of investment.
"Our manifesto says we are going to break the NNPC up. But the ultimate answer may well be to divest the whole thing," said an influential politician in Gen Buhari's camp. "It is an idea that will be seriously looked at. But I don't think it can be the immediate priority. First we need to get back to a position where revenues that belong to the people are getting into the federation account. We need to stop the leakages," he said.
Gen Buhari, who cut his teeth in office at a time when the state was the main driver in the economy, may be harder to convince.
"We can't just wake up overnight and sell the NNPC. First we need to see how much damage has been done and how can we stabilise the situation," he said in a pre-election interview with the FT. However, reformers in his camp believe he may be persuaded otherwise if oil prices remain depressed given the scant alternatives to finance the ambitious changes he has promised.
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