PIB: Sale of Shares of Oil Assets to Foreigners May Thwart Nigerian Content

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The possible sale of shares of the Nigerian Petroleum Assets Management Company (NPAMC) and the National Petroleum Company (NPC), which will be vested with certain liabilities and assets of the NNPC, as stipulated in the new Petroleum Industry Governance Bill (PIGB), may defeat the initial objective of ensuring that Nigerians are the primary beneficiaries of their oil wealth, Professor Emeka Duruigbo of Texas Southern University has said.

Speaking at the recent 10th Annual sub-Saharan Africa Oil & Gas Conference held in Houston, Texas, United States, Duruigbo also raised the alarm that with the sale of the oil assets to individuals, Nigeria’s oil wealth may be overtaken by oligarchs, while the increased political power of share owners could result in political instability

Duruigbo noted that Section 36 of the Petroleum Industry Governance Bill establishes the Ministry of Petroleum Incorporated as a corporation sole to hold on behalf of the federal government all of its shares in the successor commercial entities established under the Act.
Section 37 also provides for the incorporation of two entities – NPAMC and the NPC, which will be vested with certain liabilities and assets of the NNPC.

NPAMC shall be responsible for the management of the NNPC’s oil and gas investment in assets where government is not obligated to provide any upfront funding (essentially the production sharing contracts).

NPC shall be an integrated oil and gas company operating as a fully commercial entity across the energy value chain.
Section 38 provides that 51 per cent of the shares of the NPAMC at incorporation shall be held by the Ministry of Petroleum Incorporated while 49 per cent will be held by the Bureau for Public Enterprises (BPE) on behalf of the federal government. Section 61 contains a similar provision for the NPC.

However, Section 66 provides that within five years of incorporation of the NPC, the federal government shall divest not less than 10 per cent of its shares and within 10 years of incorporation not less than an additional 30 per cent of its shares to the public in a transparent manner.

But while Duruigbo acknowledged that the possible sale of shares to foreigners would increase the liquidity of the asset s, it may also defeat the initial objective of ensuring that Nigerians are the primary beneficiaries of their oil wealth.

He also argued that with government still retaining majority ownership, it could leave room for weak boards, favoritism, inefficiencies and corruption.
Duruigbo identified privatization, corporate finance, managerial discipline and accountability, as some of the strong points of the new reform bill.

According to him, the bill will ensure shareholder responsibility – activism to protect investment value; increase in capital transaction and individual capital formation.
He also noted that the new reform bill encourages streamlined regulatory structure – single regulator, clarity of roles, and also eliminates administrative conflicts and overlaps.

“In a bid to avoid the unwieldiness of the PIB that contributed to its downfall, this approach breaks the process into bits and pieces. The current bill deals with governance, the while fiscal, the Upstream and Midstream Administration, and revenue management (including host community fund) elements of the reform process will be handled in separate bills. The Senate seems to disregard calls to discard the Community Host Fund provision, which was a lightning rod in the defunct PIB. Retaining the provision promotes the Fund’s needed dual purpose – community compensation and community accountability – and averts negative consequences,” he explained.