Nigeria government warned against plans to sell off its equities

Jan 11, 1997 01:00 AM

The Nigerian federal government has been warned against implementing plans to sell off its equities in the upstream sector of the nation's oil industry. Chief Philip Asiodu, secretary for petroleum resources in Nigeria, said such divestment would amount to mortgaging the country's future to foreigners. He argued that the envisaged economic gains would be too insignificant compared with the more serious national security and the future of the nation's economy if the government handed off the entire industry to foreign investors. Nigeria, he said, had quite a few options to choose from, contrary to impressions being created in certain quarters that only full divestment from the oil sector could solve the government's inability to finance its cash-call obligations to joint-venture operators. This included adopting production-sharing formula which enabled government negotiations with multinational investors to provide up-front capital for cash-strapped upstream activities. Asiodu said the advantage of this was that Nigeria would be relieved of the perennial burden of paying cash calls, while the industry continued with its exploration and production projects with the financial backing of foreign investment. Additionally, Nigeria would retain ownership of its oil assets in the ground. Asiodu said the government should alternatively check some of its expenses in the peace-keeping efforts in Liberia, saying any substantial savings from this venture could be ploughed back to ameliorate the cash-strapped situation in Nigeria's oil sector. Another option open to the federal government was to explore gains of the appropriate pricing of petroleum products which, if implemented progressively as per capita income dictated over time, would help to raise substantial income. He said Nigeria must learn to protect its assets, noting that "the foreign oil companies which are willing to invest so much in finding and keeping equity oil are no fools". He wondered why Nigeria was contemplating selling its own equities whencountries like Malaysia, Saudi Arabia, Algeria, Venezuela, Iran and other OPEC member countries seemed content with managing their own affairs. The risk of selling the equities meant that foreign oil companies would own all the oil produced in Nigeria and that any attempt to requisition oil locally for any reason, even for strategic purposes, would provoke a Western charge against the Nigerian government.

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