- Kachikwu asks companies to invest if they want access to resources
- NNPC denies lobbying Buhari to increase petrol price
Chineme Okafor with agency report
The federal government has warned international oil companies they must stop treating the country like a “trading colony” and demanded they invest in its energy sector if they want to retain access to its resources.
According to the London-based Financial Times, the Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu, made the remark, adding that some of the world’s biggest independent oil traders had benefited for years from exporting Nigeria’s crude and selling the country back refined petroleum products, without putting money into developing the sector.
“We have to get selfish on this,” he told the Financial Times in an interview. “If you have been selling me (refined) products for six years and you can’t put a foothold in the country, then I shouldn’t be buying products from you.”
Kachikwu’s comments came as Nigeria faces an economic crisis, with the halving in oil prices since 2014 and renewed militancy in the Niger Delta pushing the country into its first recession in more than 20 years.
Until recently, the OPEC member was Africa’s largest crude producer. But dysfunctional refineries have left its 180m population reliant on trading houses such as Vitol, Trafigura and Mercuria for refined fuel imports.
“Nigeria cannot become a trading colony,” Kachikwu, who led the state oil company for 11 months before being removed in July. “I’m saying to them, ‘If you want to trade put your base here, do the refining here’.”
The country’s status as Africa’s largest economy is under threat
Some trading houses have already invested in infrastructure in Nigeria, while others have complained about the difficulty of doing business in the country.
Vitol has built an import terminal for liquefied petroleum gas and invested in Oando, the country’s largest independent oil conglomerate.
Industry sources said a refinery tender this year for rehabilitating the country’s processing plants, which had interest from foreign companies, was suspended because of the political sensitivity around the prospect of even a part-privatisation of state-owned assets.
Separately, some of the biggest energy producers operating in Nigeria are owed billions of dollars in arrears for joint ventures with the government. Many are shifting their focus offshore, as security concerns and payment issues mount.
“You cannot coerce a company to invest … There needs to be a well thought out policy in place to attract such investment,” said one Nigerian oil industry veteran.
Last month, ExxonMobil agreed to sell its majority stake in its Nigerian marketing and retail arm to a local company.
But Kachikwu said he wants companies to invest in more infrastructure such as refineries and pipelines, while the country is also seeking crude-for-loans deals to monetise its untapped oil resources.
“The petroleum industry got us here. It has got to get us out of here too,” he said. “It (high oil prices) spoilt everybody and we messed it all up.”
The former ExxonMobil executive said Nigeria was also in talks with the Indian government and could sign a preliminary $15 billion five-year forward sales agreement with the Asian country by the end of the year.
“You have to be careful as to how many (forward sales deals) you take,”
Kachikwu said. “You have to tie that to your capability to produce and your ability to grow production.”
Drawing in foreign investors is particularly critical as the government struggles to borrow from international sources of funding. Investors and lenders including the World Bank have raised concerns about the government’s management of the economic crisis, and plans for a Eurobond and foreign borrowing have so far not come through.
In the latest blow this week, the Senate rejected President Muhammadu Buhari’s plan to borrow $30bn from abroad for infrastructure projects and budget support.
Foreign and domestic industry executives are also less sanguine. They say the investment climate under the Buhari administration has so far been characterised by policy uncertainties and a sense of hostility towards the private sector.
The prospect of even partial privatisation of state assets such as refineries is politically sensitive.
Meanwhile, the Nigerian National Petroleum Corporation (NNPC) has defended the recent adjustment of the pump price of petrol at its retail outlets. The corporation has also denied ever meeting with Buhari to lobby for a price hike of petrol.
According to a statement from the corporation’s Group General Manager Public Affairs, Mallam Garuba Deen Muhammad yesterday in Abuja, NNPC said there was no time its management met with Buhari to push for a hike in the price of petrol from its current N145 to N150 per litre.
It said it was not statutorily empowered to make any adjustment in the pricing template of petroleum products approved by the Petroleum Products Pricing Regulatory Agency (PPPRA), adding that the media reports in this regard were not true.
The corporation stated that the price adjustment at its petrol stations from N141 to N145 per litre was still within the price band of N135 and N145 per litre approved on May 11, 2016 by the PPPRA, which is the statutory body in charge of petroleum products pricing in Nigeria.
It assured marketers and motorists of its readiness to continue to play its statutory role of being the supplier of last resort and ensuring energy security for the country.
NNPC also stated that it has over 1.6 billion litres of petrol in-country that would take the country up to 45 days to run out.