Like hydra- headed monster, the 2016 idea mooted by the current administration to sell national assets or relinquishing majority stakes in joint oil ventures to shore up liquidity has reared its head again going by the submission of Udo Udoma, Minister of Budgets.
In a presentation to lawmakers Tuesday, the Minister hinted of plans to cut its stake in joint oil ventures with multinational oil companies to sizable 40 percent this year, in order to boost revenue to grow an economy as it recovers from recession.
Many oil companies such as Royal Dutch Shell, Chevron and ExxonMobil, operate in Nigeria in a joint ventures with the state-owned Nigeria National Petroleum Corporation ( NNPC).
In the current arrangement, NNPC owns 55 percent stake in its joint venture with Shell and 60 percent stakes with others.
For more than a decade, the successive
governments have been considering reducing its majority stakes in these joint ventures, but was not under intense exigency to do so as higher oil prices boosted state coffers.
Such an idea had met stiff opposition in the past from well meaning Nigerians and economy experts who described it as a dangerous move by the Buhari administration.
Recall that in 2018, Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), flew the kite last year, when he advised the Federal Government to reduce its stake in its various Joint Venture (JV) agreements with International Oil Companies (IOCs).As at that time,many dismissed the submission of the CBN governor as a thought that would not see the light of the day probably because the economy was not in recession then.
Emefiele’s suggestion later found resonance when Aliko Dangote, similarly suggested that the Federal Government should sell its holdings in the Nigerian Liquefied Natural Gas (NLNG) to bail the country out of recession shortly after Emefiele’s
Udoma, stated the government will increase efforts to improve its finances including the “immediate commencement of the restructuring of the joint venture oil assets so as to reduce government shareholding to 40 percent.”
The Debt Office in 2017, said the government wanted to raise 710 billion naira ($2.32 billion) by restructuring its equity in joint venture oil assets, saying it had captured the proposals in the 2018 budget.
It is on record that successive governments, since the advent of democracy in 1999 have held talks with oil companies in the area of financing agreements for joint ventures after struggling to fund their portion of such partnerships through cash calls which have often been delayed in parliament.
The petroleum regulator, according to Udoma, has been given marching order to collect past-due oil license charges and royalties, within three months.
The country has also ordered oil majors to pay nearly $20 billion in taxes it says are owed to local states.
Buhari has presented an 8.83 trillion naira buet for 2019, laying out plans to drive growth. He has directed NNPC to take measures to achieve the targeted oil production of 2.3 million barrels per day this year, the minister said.
Reacting to the development, Olufemi Omoyele, business analyst and lecturer at the Redeemer’s University said ” reducing government’s stakes is a good move ,that’s the practice the world over. By selling a part of its stake will rake in money to finance the 2019 budget.”
In his own reaction, Professor Hassan Saliu, former Dean , Social Science , University of Ilorin said ” there is nothing bad in reducing stakes in oil joint ventures to 40 percent, the thing is that the money realised from it should be judiciously applied to finance the 2019 budget, which is an ambitious project.”
Ambrose Omordion, chief executive officer of Investa also supported government’s move ,saying the ” idea is not bad in itself , since government will still hold on to 40 percent stakes.”