PIB provides ‘unrestricted free market pricing’ as Nigeria mulls sale of stake in oil firm

*NNPC would be replaced by a limited-liability company, known as Nigerian National Petroleum Co., for commercial operations: Report

*Petroleum Industry Bill makes provision for ‘unrestricted free market pricing’ of petroleum products for consumers

Isola Moses | ConsumerConnect

As part of the Federal Government’s proposal to revamp the essential oil and gas industry in the economy, a long-awaited Petroleum Industry Bill (PIB) that could reorganise Nigeria’s petroleum industry makes a provision for a possible sale of shares in the Nigerian National Petroleum Corporation (NNPC).

ConsumerConnect reports that the PIB draft legislation presented to Federal Legislature in Abuja, FCT, also suggests the NNPC be independent of the Federal Government, with no recourse to state funding in the new regime.

It seeks to establish “a commercially oriented and profit driven national petroleum company.”

Hitherto, the bill, which has been in the works for two decades, is seen as a landmark for the administration of President Muhammadu Buhari.

According to report, the state oil corporation is reportedly central to corruption scandals that have wrecked the West African country since crude was discovered there in the late 1950s.

The company operates joint ventures with international energy companies that produce most of the nation’s crude and runs units that supply fuel to its more than 200 million people.

It also owns leases to offshore blocks that contain two-thirds of Nigeria’s crude reserves.

Tightly controlled by the Nigerian Government since it was established in 1977, the state oil corporation is said to have become a tool for political patronage to cronies, with opaque transactions helping to fuel corruption, according to a Bloomberg report.

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.

Report says the proposed law is not as aggressive about privatising the NNPC as a 2012 version of the bill in that 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 of deregulating the downstream petroleum sector of the country’s economy.

Antony Goldman, Founder and Chief Executive Officer (CEO) of Promedia Consulting, a political risk consultancy firm, was quoted to have said: “This is a bill that comes with the authority of the Presidency.

“It replaces an ‘outdated set of laws, layered one on top of each other since the 1950s, that are no longer fit for purpose,’ ”

The government would have to approve any plans to privatise the company, according to the bill.

It states that a sale or transfer of shares would be at a “fair market value and subject to an open, transparent and competitive bidding process.”

Nigeria’s latest proposed oil bill makes a provision for “unrestricted free market pricing” of petroleum products, permanently ending decades of government-subsidised gasoline if the bill becomes law.

The proposed legislation currently before the Federal lawmakers sets up a regulator to “provide pricing and tariff frameworks for natural gas in midstream and downstream gas operations and petroleum products based on the fair market value.”

In the fresh bill, 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 Federal Ministry of Finance, Budget and National Planning.

The bill also provides for an annual audit of the new oil company by an independent firm.

Other highlights of the PIB are a provision for “unrestricted free-market pricing” of petroleum products, ending decades of government-subsidised 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.
Additional reporting by Alexander Davis