Israel Aye, partner at Commercial and Energy Law Practice, CANDELP, has said that Nigeria needs to do more to be able to increase the appetite that will attract investment in the country.
Aye said this in an interview with ARISE NEWS on Wednesday, while reacting to the statement of the Nigerian National Petroleum Company Limited, NNPC announcing their search for private operators.
The NNPC on Monday, announced that it was seeking private companies for the operation and maintenance of its Port Harcourt refinery in Rivers State.
It said the objective was “to ensure reliability and sustainability towards meeting the nation’s fuel supply and energy security obligations.”
The NNPC further stated the criteria for intending bidders to be considered for engagement, on their website.
He said “The appetite to invest in Nigeria is very low unfortunately. We need to do more to be able to increase the appetite that will attract investment in this place. One of those things would be to create a sanctity of contract, those types of assurances that people would see and then you are going to have a handful of people with capacities, serious contenders from around the world and I think the deal they would be asking for would be instilled effectively.
“In other words, they are going to be asking for margins that are above the average because of the issues around country risk. look at the dispute resolution areas as well, it is a mechanism that is accessible to them. Those are the things I imagine that the decision makes are looking at to ensure that they get serious contenders. But directionally, the approach is not a bad one.”
“The subject of diversity privatizing or selling off these entities or refineries is not as straightforward and easy as people think. There is probably not a lot of appetite for it. What some of the experts have said is that it is a lot easier to build a brand-new refinery than to take over these refineries and refurbish them. If you say sell, our experience shows that there are probably not a lot of people who have the appetite to buy or for a good value.
“Finding an entity that has a turnover of about two billion dollars, would it be profitable to take over an aged facility and see how you can run it or would you just invest a 500 million dollar and build a small thing? I think the value of proposition here is that the federal government is basically absorbing all capital outlets associated with refurbishing or sort of effectively reinstalling this particular facility. So, the O&M provider would simply just need to mobilize personnel and equipment in place, and then the overheads that are associated with that.
“The national resource economy cannot be shrouded in secrecy. You might argue that refining is not necessarily an extraction industry but it is associated with extraction and I would make the argument that those principles should apply. The principles of full disclosure. As you are aware, the principles of the EITI have in fact been embedded within the petroleum industry act to the extent that you can no longer hide, particularly when it involves public companies or government.
“You should no longer be able to conceal the details of a transaction on a basis of confidentiality, even if confidentiality provisions exist, the citizen and press should be able to call for the disclosure of at least key points of any transaction. We would like to see what the shares are, what the returns are, what the tenure is and hopefully that would be like a courtship leading to diversifying out of that and reaching that objective of NNPC becoming a minority shareholder or as the case maybe, non-shareholder at all.”
Chioma Kalu
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