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NNPC advocates quick reform to mitigate oil revenue erosion

By BusinessNews Staff on April 30, 2015

The Nigerian National Petroleum Corporation (NNPC) has proposed immediate reforms that would reduce Nigeria’s seeming over reliance on oil revenue to offset over 85 per cent of her national expenditure.

NNPC explained that a structural reform of Nigeria’s public finance model to insulate her oil industry from serving as a source of economic rent instead of an economic enabler to all other sectors of the economy, should first be pursued by the federal government now that the global price of crude oil is at a low ebb.

Pointing out that Nigeria possibly has a good opportunity to rework the operational mode and contributions of her oil and gas industry with the receding oil price, which has impacted heavily on the country’s revenue from the industry, the NNPC called for reforms that are immediate and effective to mitigate the revenue erosion.

“Broad review of public finances, you just simply remove the reliance of this one product and place this economic burden on other non-oil sector because if oil is only 15 per cent of our GDP, there are other sectors that contribute 85 per cent and oil can serve as an enabler to them, that’s what we mean by reforming,” said NNPC’s Group Coordinator, Corporate Planning and Strategy, Timothy Okon at the 2015 Oloibiri Lecture Series and Energy Forum (OLF) in Abuja.

Okon said: “Hard times call for a hard-nosed examination of existing plans to spend large significant capital in the oil and gas sector.

It will be important for FGN and for NNPC to maintain a prudent level of capital spending to support cash generation in the medium term and to develop critical infrastructure to build the country’s gas and power sector.”

He added: “Given the continued decline in global oil price and future expectation to remain so, many governments and oil companies are re-strategising to ensure its continual survival.

The Nigerian Government and NNPC are also advised to follow suit. Recommendations include; passage of the Petroleum Industry Bill (PIB), restructure public finances, subsidy removal on petroleum products, focus on profitable subsidiaries, review CAPEX spending, explore Asian markets, domestic refinery optimization and deliver export and domestic gas projects.”

“However, we also believe projects in Nigeria currently exhibit low capital productivity and there is much you can do in terms of right scoping, design-to-value, more effective contractor management, and lean construction in order to deliver projects at lower cost,” Okon said.

NNPC in addition to requesting for such structural reforms, also canvassed that Nigeria should shift its attention to developing her natural gas resource, which currently has a discovered quantity that is in excess of 179 trillion cubic feet (TCF).

Nigeria with its gas reserves of 179TCF ranks ninth in the world and first in Africa, yet its gas production is only ranked 23rd in the world.

The corporation stated that Nigeria’s gas can feed industries that are natural gas off-takers as well as meet the demands of the electricity industry.

[ThisDay]

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