Nigerian govt. should sell off its oil equity — NEITI

The Nigerian Extractive Industries Transparency Initiative on Friday asked the Federal Government to consider a phased divestment of its equity in the six multinational oil and gas joint ventures in the country’s upstream petroleum industry.

Participants in a capacity building workshop on oil and gas sector governance urged the government to consider the option in view of the huge cash call debt to the JV partners, in the face of dwindling oil revenues as a result of declining global crude prices.

A similar call was made recently by the Central Bank of Nigeria governor, Godwin Emefiele.

In its Fiscal Allocation and Statutory Disbursement Audit Report, NEITI said the Federal Government had budgeted about N3.3 trillion for the period to finance its cash call obligations in the partnership with the Nigerian National Petroleum Corporation.

The JV companies include Shell Petroleum Development Company, ExxonMobil Nigeria Unlimited, Chevron Nigeria Limited, Total Upstream Nigeria Limited, Nigeria Agip Oil Company and Pan Ocean Oil Company.

Although NEITI records showed that about N3.48 trillion was actually disbursed for the period, the bulk of the funds could not be accounted for, as the Federal Government was still unable to fully meet its obligations to the joint ventures.

The government’s inability to meet its obligations has not only resulted in several cut backs on industry programmes, the NNPC partners have had to resort to various alternative funding arrangements for its operations.

Participants at the workshop organised by NEITI civil society steering committee in conjunction with the World Bank, said in a communiqué that the demand for government to divest part of its shares in the JVs was inevitable if the pressure on the country’s lean resources by the huge cash call debt obligation was to be reduced.

“This divestment will open the arrangement for private sector participation and enhance increased inflow of revenue to the federation,” the Chairperson, Civil Society Steering Committee of NEITI, Faith Nwadishi, said.

“Above all, it (divestment) will reduce the corrupt practices, wastes and other leakages associated with the management of the JVs over the years.”

Part of the proceeds from divestment, Ms. Nwadishi explained, would be strategically channelled to the development of infrastructure, agriculture, power, transport, solid minerals, education and health sectors, while the remaining funds would be reserved for future generation.

Noting the massive corruption in the oil and gas sector, Ms. Nwadishi, who is also the civil society representative in the board of the global Extractive Industries Transparent Initiative, called for an urgent and thorough investigation into the abuses of the petroleum subsidy regime and all the oil and gas audit remediation issues by NEITI over the years.

The committee said it found it unacceptable that in two years (2011 and 2012) over N3.2 trn was paid by government as subsidy on petroleum products as revealed by NEITI audit reports.

She urged all NEITI inter-ministerial task team members to show more commitment in addressing all remediation issues, including the unremitted $11.6 bn dividends paid by the Nigeria Liquefied Natural Gas to NNPC on behalf of the federation.

Other resolutions by the workshop included that daily allocations of 445,000 barrels of crude oil to the NNPC for local refining be reviewed downwards considering that the country’s four refineries in Port Harcourt, Kaduna and Warri were currently operating at below 20 per cent utilization capacity.

The allocation of crude oil beyond the refineries’ capacity to refine, the workshop noted, had created room for abuses and corruption, through the export and re-importation of refined products under swap and offshore processing arrangements that have constituted huge economic losses.

The government, the workshop said, should create an enabling environment for private investment to build new refineries, while government should carry out the necessary turn-around maintenance on all the existing refineries to make them operate at their optimum capacity and efficiency.

On the issue of Petroleum Industry Bill, which has been waiting the approval of the National Assembly, the civil society groups expressed concern that after 8 years of legislative efforts and several billions of naira spent, the bill was still not passed.

They called on President Muhammadu Buhari and the 8th National Assembly to demonstrate their patriotism and political will to promote transparency and accountability in the oil and gas sector by ensuring that the bill was passed and signed into law within the first 100 days of the life of the present administration, to set a solid legal foundation for the new transparent fiscal and operational regimes for the country’s oil and gas sector.

That CSOs also requested the President to begin the implementation of remediation issues identified in the NEITI audits in line with his campaign promises, pointing out that this was exposing Nigeria to the risk of being sanctioned by EITI in January 2016, when Nigeria becomes due for validation.

Besides, the groups asked government to review the idea of granting “pioneer status and certification” to prospective investors as incentive policy, while the divestment of equity in already producing oil mining leases should be revisited, to curb the present abuse in the oil and gas sector which resulted in revenue losses to Nigeria.

While calling for the cessation of the current opaque discretionary process of oil blocks awards, the groups said the government reverse all such awards and made to go through normal bidding process, as this process contradicted due process, transparency and competition, and deny Nigerians value from natural resources.