Bola Tinubu’s Policy Advisory Committee has put forward a multi-phase proposal that envisions the sale of NNPC Limited’s shares in oil fields located in the Niger Delta. This initiative aims to generate approximately $34 billion in revenue for the Nigerian treasury within five to six years, according to the Africa Oil + Gas Report.
The report, called “Enabling Growth in Nigeria’s Energy and Natural Resources Sectors: Sector Challenges and Proposed Intervention,” used previous transaction values as references, particularly focusing on deals involving specific assets in Nigeria.
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Currently, NNPC possesses a stake of approximately 55% to 60% in Joint Ventures responsible for delivering over 80% of Nigeria’s crude oil production. The plan under consideration involves selling a portion of NNPCL’s stake in such a way that NNPC’s ownership in these acreages would be reduced to below 50%. According to the policy advisory committee, the reason for the sale is to “foster private sector participation, attract foreign direct investment, and promote competition and efficiency within the industry.”
The committee’s plan includes setting up a special team to evaluate the collection of upstream, midstream, and downstream assets owned by NNPC. This team will carefully examine and verify the potential options for selling these assets. They will also conduct a detailed analysis to make informed decisions about the best course of action.
The committee suggests that the administration should hire outside experts like investment bankers, legal advisors, and financial advisors within the first 100 days of taking office. These experts would help in finding potential buyers and testing transaction principles with important stakeholders. The committee’s recommendations involve assigning the experts the tasks of creating a strong transaction process, establishing a suitable timeframe for execution, and evaluating market conditions to maximize the divestment’s value.
To attract potential buyers and financiers, the Committee suggests preparing an Investment Memorandum (IM) and Management Presentation. These documents will offer in-depth information about the assets for sale and emphasize the investment benefits. The Committee will identify potential bidders and ensure the signing of non-disclosure agreements (NDAs) to enable the sharing of confidential information.
Once potential buyers are identified, a data room will be created, and a shortlist of candidates will be chosen for a thorough evaluation. The committee recommends engaging in bidding and negotiation processes to secure favourable pricing and contract terms. Subsequently, a Sales and Purchase Agreement (SPA) will be drafted, and upon its signing, preparations for the transfer of operations will commence.
The committee’s recommendations are divided into three phases. In the first phase, which lasts for 18 months until December 2024, the committee suggests selling some of NNPC’s stakes in shallow water assets operated by International Oil Companies (IOCs). The initial divestments of NNPC stakes in shallow water assets are estimated to be worth up to $4.5 billion. Looking ahead, the committee recommends selling some of NNPC’s stakes in the shallow water joint venture with Nigerian independent companies as part of the longer-term plan.
The divestments planned for the second phase are expected to be valued at around $12.9 billion. In the long term, after May 2027, the Committee suggests finalizing the sale of Joint Venture (JV) assets in the Onshore East and West regions, either those planned for divestment or already in progress. This is estimated to amount to approximately $16.4 billion, resulting in a total of $33.7 billion in upstream sales.
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According to the committee’s report, “By reducing NNPC’s stakes, the government aims to increase efficiency and unlock the sector’s potential for sustainable economic development in a country battling multi-dimensional poverty and dwindling income.”
The idea of selling off NNPCL equities is not new and has been discussed for many years. This consideration arises due to the underperformance of several NNPCL assets such as the refineries and the subpar functioning of the company’s midstream and downstream infrastructure, including product pipelines and depots.
In 2017 and 2018, the national budgets created by Udoma Udo Udoma and Kemi Adeosun, who were the Ministers of Budget and National Planning and Finance at that time, included this idea. But unfortunately, the plan was never approved or put into action. By the start of Buhari’s second term in 2019, the plan was already scuffled, with the new Minister for Finance, Zainab Ahmed announcing in 2020 that Nigeria’s oil assets were not for sale.
Although the committee’s proposal has clearly outlined plans for transferring these NNPC assets, there are obstacles associated with the proposal, including the political will to take such giant leaps. Before the 2019 elections, the Presidential Candidate of the major opposition party, PDP said during his campaigns that he would sell off 90% of the NNPC.
When asked in an interview about the sale of the then NNPC, he noted, “Yes, I would want to go ahead. There is no doubt about that. The government should have a very minor shareholding. Nigeria is in dire need of funds to develop its infrastructure and other sectors of the economy.” However, after making that statement, Nigerians expressed their dissatisfaction with the fact that a prominent presidential candidate would consider privatizing one of the country’s “national carriers.”
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In 2021, Atiku doubled down on his earlier suggestion to privatize the NNPC and sell off its refineries. He noted, “And even with the paucity of funds, we continue to ramp up government involvement in sectors that ought to be left to the private sector, with the latest being the ill-advised $1.5 billion so-called rehabilitation of the Port Harcourt Refinery that has failed to turn a profit for years.”
While Bola TInubu never touted the idea of selling off NNPC during his campaigns, it seems his pre-inauguration policy advisory council has proposed a similar move. And since Olu Verheijen a prominent member of the committee, has become the President’s Special Adviser on Energy, there is a possibility that Mrs Verheijen might effectively convince the President to support the idea.
