Nigeria Is Splitting Up Its State-run Oil Monopoly. Can Competition Save It?
Nigeria plans to overhaul its corruption-riddled state oil and gas firm by breaking it up into 30 separate companies, with promises to be profitable as soon as July, AFP reported in BusinessDayLive.
The move is designed to make the Nigerian National Petroleum Corp. more efficient, Junior Oil Minister Emmanuel Ibe Kachikwu said Thursday at an energy conference in Abuja.
“For the first time we are unbundling the subset of the Nigerian National Petroleum Corp. to 30 independent companies with their own (managing directors),” said Kachikwu, who also has the title of group managing director of the Nigerian National Petroleum Corp.
With Africa’s top oil-producing country struggling financially because of low oil prices, President Muhammadu Buhari is taking steps to root out the problems in its powerful oil bureaucracy, WSJ reported.
Nigeria has been hit hard since mid-2014 by falling global crude prices.
Buhari started reforming the Nigerian National Petroleum Corp. in 2015 when he fired the entire board and appointed Kachikwu, an experienced oil executive formerly with ExxonMobil, to head it.
The Nigerian oil company is losing $15 million a month, Kachikwu said, according to AfricaNews. He promised it will return to profitability as soon as July, 2016.
Kachikwu promised to uproot the firm’s “anything-goes” culture, overhaul opaque practices and fire people for underperformance, BusinessDayLive reported.
“Titles like ‘group executive directors’ are going to disappear and in their place you are going to have CEOs and they are going to take responsibilities for their titles,” Kachikwu said.
Nigeria has applied for a loan from the World Bank to help shore up its budget deficit this year, WSJ reported.
The previous administration of Goodluck Jonathan has accused of bribery and misappropriation of funds in the oil sector. Former oil minister Diezani Alison-Madueke is being investigated on corruption allegations in Nigeria and the U.K. She has denied doing anything wrong, according to her lawyer, WSJ reported.
Buhari, who was elected in 2015 on an anti-corruption ticket, promised to recover “mind-boggling” sums of money stolen from the government in past administrations.
Unbundling the 30 companies ‘‘is just a tip of the iceberg,” Kachikwu said. “We are all going to compete. We are going to make these things work,” he said.
This will include repairing damaged pipelines that supply crude oil to the refineries, and revamping oil refineries to make surplus petroleum products, TheNation reported.
Reforming the oil and gas industry will put the right people at the helm, Kachikwu said.
“With the right people in petroleum sector, there will be increase in revenue for the country through sales of crude oil and petroleum products. The products will be at affordable price and government will ensure lowest prices. The reforms will provide employment opportunities for Nigerians.”
Nigeria’s petroleum industry in the past 25 years has lacked accountability and openness in its management, Kachikwu said, according to TheNation. This led to a decline in refinery capacity.
Buhari had directed the Nigeria National Petroleum Corporation to publish its monthly report in efforts to be transparent and open.