Partial privatization of corporation will help curtail drastic fall in global oil prices

yinka ogunlami

February 24, 2016 2:01 PM

Oteh stated that the partial privatization of the NNPC would help curtail the effects of the drastic fall in global oil prices on the economy.

NNPC

Oteh stated that the partial privatization of the NNPC would help curtail the effects of the drastic fall in global oil prices on the economy and help raise necessary funds needed for oil infrastructure investments.

“Partial privatisation would raise money needed for oil infrastructure investments, lower future liabilities, enhance transparency and help optimize the NNPC’s structure. Some of these proceeds could also be used to rebuild macroeconomic buffers, depleted by the collapse in oil prices and the failure to have saved more when price were high.

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Highlighting the positives of the partial privatising, Oteh said it will lower future liabilities, enhance transparency and help optimize the NNPC structure.

“Proceeds of a sale could also be invested in education and infrastructure that will grow and diversify the economy and create jobs in the long term.”

“However, the sale process will require very high levels of protection and accountability to avoid the kind of manipulation and under-pricing observed in other countries. For example, private equity groups could be encouraged to compete with the oil companies for acquisitions to ensure competitive sale prices,” she said.

“Its status as a statutory corporation with large debts and no credit rating means it cannot negotiate much external debt financing on its own.

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“To help the corporation finance its operations and badly needed investments in Nigerian oil infrastructure, the NNPC could sell equity, either by divesting physical assets or listing shares on the Nigerian Stock Exchange, to raise capital for important investments.”

yinka ogunlami