Buhari presents estimates to N/Assembly Tuesday
The Federal Government is considering selling some of its stakes in oil joint ventures to raise about $3 billion (about N1 trillion) in order to reduce the deficit for 2018 budget, Daily Trust has learnt.
The proposed 2018 budget of N8.6trillion has about N3.3trillion deficit, according to the details of the 2018-2020 Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP) seen by Daily Trust.
The asset sales proposal is contained in the FG’s Economic Recovery and Growth Plan, released by the Ministry of Budget and National Planning.
It said that the government’s stakes in other oil and non-oil assets would be significantly reduced.
The debate on the sale of oil assets to fund the budget started in 2016 when eminent Nigerians such as the former governor of Central Bank of Nigeria (CBN) and now Emir of Kano, Muhammadu Sanusi II, the President of Dangote Group Alhaji Aliko Dangote, and the present governor of the CBN, Godwin Emefiele urged the government to consider disposing some stakes in the joint venture agreement or the oil refineries to raise fund for development.
The government jettisoned the suggestion due to the pressure from activists and some lawmakers. However, sources said the government is now considering the idea as the feasible option to reduce its financial burden.
The sources said the government for now has ruled out selling the refineries but has opted to reduce its stake in JVs with international oil companies.
Nigerian government through the Nigerian National Petroleum Corporation (NNPC) operates seven joint venture partnerships with Shell (55:45 per cent) and 60:40 per cent with Mobil, Chevron, Total, Agip, Elf and Panocean.
Unpaid cash call arrears as a challenge
Experts envisage loophole in the proposed sales of the JVs stakes due to the unpaid arrears of the cash call agreement. Records show that unpaid arrears of $6.8bn in cash calls from 2010 to 2015 are hanging on the neck of Nigerian government.
Last year, the federal government proposed a new regime for funding the joint venture partnerships in the upstream sector with a new structure beginning this year.
Under the new proposal, the government will no longer fund its 60% contribution in the JV projects, potentially paving the way for an inflow of $15 billion fresh investments to the sector.
An insider in the oil industry who pleaded for anonymity said the selling of stakes and restructuring the cash call agreement is like two projects at the same time.
The source said the process will require longer period of time due to the complexity on the unpaid arrears, adding: “I am not sure they can conclude that within the 2018 budget cycle.”
An oil and gas expert, Dauda Garuba is of the opinion that selling the country’s upstream oil assets to fund the budget would amount to a short term solution for a long term problem.
“If it is for the budget we are selling our stake, I don’t think we are taking a good decision. But if it is in the context of the ongoing reforms in the oil and gas sector, then we begin to consider it as an option,” Garuba said.
NNPC spokesman Mr. Ndu Ughamadu was not immediately available to comment.
