There is need for a larger role for the private sector in the Nigerian economy, according to experts, who also urge reforms that include privatising the Nigerian National Petroleum Corporation (NNPC) and replicating the successful NLNG model in the management of oil sector assets. This, they say, has become increasingly critical in the wake of looming recession following the outbreak of the coronavirus pandemic.
Imo Itsueli, former chairman of the NNPC board, in a presentation during the BusinessDay webinar in collaboration with MTN Nigeria, said more private sector involvement in the economy is the best way to get out of the current fiscal crisis.
“There are many things we have not done well and continue to do badly in the oil and gas sector,” Itsueli said during the webinar on Wednesday on the theme ‘The National Economic Emergency (Nigeria; the economy, governance and citizenship in the time of COVID-19)’.
He said Nigeria has continued to produce below 2 million barrels of oil a day because it lacked investments required to ramp up production. The investments have stalled because the country has failed to enforce the required reforms that will attract investments.
However, this is hardly new counsel. The government continues to show lack of political will to take urgent reforms.
Atiku Abubakar, the presidential contender on the platform of the People’s Democratic Party during the last general elections in the country, called for the privatisation of the NNPC.
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) in January urged the Federal Government to adopt the NLNG model to revive the country’s four ailing refineries.
The Federal Government has ignored these counsels as oil proceeds mask an economic rot. Now, under strain from depressed oil prices, fallen demand, crumbling non-oil proceeds and rising debts, the carcass of a wilting economy stares at bemused government officials.
The situation looks to worsen as the recent agreement among oil producers to cut about 9.7 million barrels a day places a cap on Nigeria’s production to no more than 1.4 million barrels. Even then, Nigeria has struggled to sell its crude in an oil market brimming with so much supply; it is running out of storage spaces.
Itsueli said Nigeria has been unable to pass a Petroleum Industry Bill for over 20 years and the country is not even replenishing oil production as investments have been too few and far between.
“Industries thrive best when industries lead the business environment. The government should give instructions and allow the private sector to operate,” Itsueli said.
He said Nigeria needs to learn from the US and Canada which have no national oil companies.
“France, Italy, Germany, the UK, all used to have oil companies and they have metamorphosed to private companies because they are more efficient at managing them,” Itsueli said.
Kyari Bukar, onetime CEO of Valuecard and former chairman, Nigerian Economic Summit Group (NESG), in his presentation also called for a larger role for the private sector as a way out of the current economic quagmire.
The webinar was moderated by Enase Okonedo, professor and dean, Lagos Business School. Other resource persons include Atedo Peterside, founder, StanbicIBTC Bank plc and chairman, ANAP Foundation COVID-19 Think Tank, as well as Chidi Odinkalu, professor of Law and former executive secretary, Nigeria’s Human Rights Commission.
The ownership structure of the NLNG makes it an independent incorporated joint venture, guaranteeing an independent board of directors, effective decision making as well as funding for its projects.
NLNG operations are based on international best standards with all the parties carefully scrutinising every decision to ensure benefits are maximised. This is why the company currently accounts for at least 4 percent of Nigeria’s gross domestic product and is one of the biggest taxpayers in the country.
“Imagine what would happen, if NLGN is 100 percent in private hands,” said Itseuli.
Unlike the NNPC which spends billions to maintain refineries that do not produce refined products, the
NLNG seeks to maximise investors’ assets. The NNPC maintains subsidiaries that make profit on occasion. It is largely seen as inefficient, opaque and corrupt.
NLNG’s unique ownership and operating model has also made it difficult for the National Assembly to amend the Act that established it. Because of its incorporation charter, with companies and their countries being represented, the NLNG Act has been elevated almost to the status of a treaty and all parties are required to amend it.
Analysts say the ownership and management structure of Nigeria’s oil sector assets, including the NNPC, should be privatised and the NLNG model replicated in NNPC.
In the face of irresponsible management of Nigeria’s oil assets, experts also say private companies should hold government to account for taxes and levies paid to it.
“The oil industry taxation system is 85 percent of income is paid as taxes and every oil exploration company pays 20 percent royalty on each barrel of oil, what is the government doing with it?” Itsueli asked.
