Nigeria can raise $75bn selling down oil assets – CBN Gov

Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), has said Nigeria’s incoming government could raise about $75 billion (N15 trillion) for infrastructure development, if it considers selling down the nation’s majority stakes in joint ventures with multinational oil companies.

 

“If you sell down a 30 percent stake you could raise something substantial. It is an option they need to consider as a way of raising further funding,” Emefiele told  the Financial Times (FT) in an interview.

Emefiele said he has asked CBN officials to evaluate how much could be raised if the state-owned Nigerian National Petroleum Corporation substantially reduced its 55 percent 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 $75 billion 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, writes the FT.

Emefiele explained that a greater portion of the sales proceeds should be invested in transport and energy developments that would “grow the economy and create jobs”, while the balance is diverted to rebuilding external reserves, badly hit by the 52 percent drop in oil prices since June 2014.

External reserves currently stand at $29.5 billion and a simplistic scenario of $75 billion sales proceeds could gross Nigeria’s buffers to an all time high of $104 billion, a few billions lower than the GDP of neighbouring Ghana.

Bismarck Rewane, CEO of Financial Derivates says the CBN governor’s suggestion is “bold and innovative”.

“While it cuts inward revenues from oil sale going forward, since the oil market is soft, you might well sell and get instant cash today, so government can meet urgent needs.

“Our circumstance suggests we need cash, therefore, it makes sense, as long as you sell and scrap NNPC and then become more efficient in tax collection.”

“It may also open up the industry and really allow hidden benefits to impact the rest of the economy, ” argues Rewane.

However, selling state assets without first plugging leakages or restoring government credibility may be putting the cart before the horse.

Ayo Teriba, CEO of Economic Associates says, “The biggest challenge of the incoming regime is to plug leakages in government revenue receipts.

“If leakages from import duty waivers, fuel subsidy scam, and revenues from currently underperforming MDAs can be harnessed, Nigeria will not have to forfeit current healthy returns from existing JV investments.

“If leakages are not plugged, the risk that proceeds from asset liquidation will similarly leak off should not be ignored.

“Restoring government credibility that extant revenue inflows will be transparently managed is the more pressing challenge of the President-elect,” Teriba wrote in an email response to questions.

The CBN governor told FT that he has 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,” Emefiele said, adding that petroleum profit taxes could be adjusted upwards to compensate for the state’s reduced stake in crude oil sales.

According to FT, the governor’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.

Akin-Olusoji Akinyele