Nigeria to sell 30% of its interest in new national oil company

December 24, 2015 | Asset Acquisitions & Divestitures, Nigeria

Abuja, Nigeria | – The Nigerian Federal Government is expected to sell to the public at least 30 per cent of the shares of the National Oil Company, one of the commercial entities to be created to replace the Nigerian National Petroleum Corporation, NNPC, Nigerian  newspaper Punch reports.

According to the Petroleum Industry Governance and Institutional Framework Bill 2015, a copy of which was made available to news correspondents, the divestment of the shares will be done within six years from the date of the incorporation of the NOC.

Under the draft legislation, the state-owned NNPC will be split into two companies limited by shares, rather than a series of units as envisaged by the stalled Petroleum Industry Bill 2012.

The NOC, also known as the National Petroleum Company, is one of the two companies. The other is the Nigerian Petroleum Asset Management Company.

“The Federal Government shall at anytime within six years from the date of incorporation of the National Petroleum Company divest not less than 30 per cent of the shares of the National Petroleum Company to the public in a transparent manner,” the document said.

It said at the time of its incorporation, the initial shares of the company would be held by the Ministry of Finance and the Bureau for Public Enterprises on behalf of the government.

The Board of Directors of the NOC may with the approval of its shareholders utilise any appropriate mechanism, including sale of assets and interests, to offset any liabilities of the company or meet any of its future obligations.

Upon incorporation, the NPAM will be responsible for the management of the NNPC’s oil and gas investments in assets where government is not obligated to provide any upfront funding, while the NOC will be an integrated oil and gas company operating as a fully commercial entity across the value chain, according to the document.

It said the minister of petroleum resources might, in addition to the incorporation of the NOC and the NPAM, incorporate other entities to assume and manage some of the liabilities of the NNPC.

“The NOC will be entitled to retain its revenue from its operations and shall be entitled to defray from such revenue all its expenses including its cash call obligations in respect of its joint venture assets and its petroleum operations and its obligations to lenders and financiers.”

The dividend policy of the NOC will be determined by the Board of Directors in accordance with the Companies and Allied Matters Act and approved by the shareholders, the draft legislation said.

Commenting on the draft legislation, an Oil and Gas Analyst for Africa at Renaissance Capital, Temilade Esho, said, “These changes are positive in our view; however we do not see the changes happening or impacting the sector in the short term because the bill needs to pass through the Senate which may take some time.

“We had previously mentioned that the passing of the PIB piecemeal is the way to go and are pleased that the government has taken this approach.”

According to her, the NOC as a private company reduces corruption and enables the corporation to reduce operating cost, unapproved spending and overhead cost, which is one of the main issues with the NNPC.

“This removes the government’s involvement in the operations and cash call funding of these assets. If passed, the government will now receive royalty, taxes and dividend on the asset owned,” Esho said.