/ 21 January 2019

Privatise Nigeria’s oil industry? Easier said than done

Abubakar comes from the Muslim-majority north
Abubakar comes from the Muslim-majority north, and his nomination follows an unwritten rule in Nigeria that the presidency should alternate every two terms between a candidate from the north and south. (Paul Carsten/Reuters)

A leading contender in Nigeria’s presidential election next month has pledged to privatise the country’s oil industry, but that’s a promise that might prove hard to keep, some observers say.

Atiku Abubakar, the main opposition party contender, has vowed to break up the Nigerian National Petroleum Company (NNPC), which he called a “mafia organisation”.

The NNPC and other state-run organisations have been widely criticised as becoming slush funds for successive governments, particularly around election time in the African OPEC state.

Abubakar, who served as vice-president to Olusegun Obasanjo between 1999 and 2007, made his latest remarks at a conference on the economy in Nigeria’s economic capital Lagos last week.

“I said unless we dismantle these mafia organisations, we cannot progress, let’s privatise them,” he said.

“I am committed to these privatisations, as I have said. I swear even if they are going to kill me, I will do it.”

Sitting president, Muhammadu Buhari, who is running for a second term in office, made the fight against corruption a keystone of his first election campaign.

His junior minister for oil, Emmanuel Kachikwu said: “In terms of corruption, he (Buhari) has done his very best.”

Climate of fear 

But it was Kachikwu himself who in late 2017 denounced what he called the “climate of fear” at the heart of the NNPC since the president appointed one of his close associates, Maikanti Kacalla Baru, as group managing director.

Last April he also spoke out against the state subsidies to cut the cost of petrol for motorists, saying it cost the government $3.9-billion every year.

In fact, the NNPC, which has total control of distribution, has been accused by many campaigners of overestimating the number of litres used by an exorbitant amount in order to rake back in more money to the government.

“(The) NNPC monopoly on fuel distribution is not an ideal situation and will have to end,” said Kachikwu.

“And then part of the corruption in the area will also end.”

But he warned: “If we are not fixing it, we are going bankrupt.”

Kachikwu reports directly to Buhari, who as well as being head of state has taken on the oil minister portfolio himself.

Buhari takes much the same line on corruption as his main rival to the presidency, Abubakar.

At an election campaign meeting Wednesday, Buhari promised an overhaul of the NNPC to claw back billions of dollars in looted public funds.

Kachikwu came into Buhari’s government as a political novice but as an expert in the field. He previously served as ExxonMobil’s deputy chief for Africa.

He reckons that to reinvigorate the country’s oil industry and increase production to four billion barrels a day it would take between a 25 and 30-billion dollars’ investment.

The only way that is going to happen, he says, is via the privatisation of the NNPC and the liberalisation of the sector as a whole.

“Nobody needs the government to do their business,” he said. “(The) NNPC is overseeing the whole chain of production, from the pipelines to the exportation or distribution.”

It also seems powerful enough to have successfully blocked all political attempts to reform an organisation which carries about a million barrels a day — 50% of the total volume of oil output in Africa’s top oil producer.

Campaign talk

“To talk of privatising the NNPC is campaign talk directed at foreign investors,” said Benjamin Auge, an analyst at the French Institute for International Relations.

But it is not a vote-winner and has no impact of the real root of the corruption — the allocation of rights to sell petrol, he added.

Every year, the NNPC allocates a series of traders to handle crude oil exports. And every year, with each successive government, new names or new companies, sometimes completely unknown, appear on these lists.

This get-rich-quick scheme could be limited with the creation of a new local refinery, one repeatedly promised by Nigerian billionaire Aliko Dangote, as that would cut the exports of crude oil.

The refinery, first announced back in 2013, would produce 400 000 barrels of petrol a day — compared with the 100 000 currently produced.

“But the traders’ lobby is so powerful that one can even doubt that the project will see the light of day,” said Auge.

That example of the strength of the oil lobby — and the vasts sums of money at stake — casts doubts on politicians’ claims that the NNPC can be dismantled quite so easily as they would have voters and investors believe.