Saudi Aramco listing and the lessons for Nigeria By @OkeStalyf

Few days ago, Saudi Arabia’s giant oil firm, Saudi Aramco, upset all predictions and shock expectations when its account book showed a staggering $111.1bn net income in 2018. The numbers were so impressive that Saudi Aramco earned more profit last year than the combined profit of Apple Inc. and Alphabet Inc. (the proprietary of Google), making it the world’s most profitable company by far. Before now, Saudi Arabia’s Crown Prince, Mohammed Bin Salman, have been uncomfortable with the country’s over reliance on oil and wanting to diversify the economy, focusing on investment in technology. Already, huge chunk of the country’s sovereign wealth fund has been invested in technological companies like Uber and Tesla but the need to raise more funds to meet the crown prince Vision2030 makes issuing initial public offer (IPO) for Saudi Aramco inevitable. Raising these funds with the name Saudi Aramco was not the main attraction to investors but the transparency of the Oil Company. For the past two years, Saudi Arabia government have vigorously pursued reforms to shed its cloak of secrecy and consistently indicated plan to list the world largest oil producing company, valued at $2trn, on public stock. Obviously, the opening of the national oil firm account book signified a step towards transparency and probably woo investors. Though, Saudi Aramco have been Saudi Arabia’s major revenue source over the years, the Mohammed Bin Salman-led government is trying to shift away from that dependency and really, the only way to make that happen is through the oil giant, expressively, selling off certain stakes to build other economic sectors. Essentially, Saudi Arabia is thinking of the future and leveraging on Saudi Aramco, to create a future stream of income. This brings me to a hotly discussed issue in the build-up to the recently concluded Nigeria’s presidential election. It was sparked by a proposal from the main opposition Peoples Democratic Party (PDP) candidate, Atiku Abubakar, to hands-off stakes in the country’s national oil firm, the Nigerian National Petroleum Corporation (NNPC) to private investors by issuing IPO. Pushing his argument on why his proposal was ideal and necessary for the economic sustenance of the country, Atiku was quoted in African Report, a monthly publication, that “Nigeria is in dire need of funds to develop its infrastructure and other sectors of the economy.” In a clear context, the former Vice-president proposal was no different from what the Saudi Arabia government has done with the $10bn bond offered but most of those opposed to it only saw the proposal from the prism of politics. For the entire time that the debate lasted, sentiments was allowed to replaced reality and those who opposed the privatisation of NNPC ignored the questions of transparency and accountability that have cast a blithe on the oil firm over the years. While they insisted that Atiku had “dangerous intention for Nigeria”, they were stuck in the past and failed to think of what becomes of the future, knowing well the unpredictable circumstances of oil revenue. Though, it’s not wrong for Nigerians to be apprehensive on the foreseeable future of NNPC in the hand of private investors, what I however, find mussing is the neglect of the bigger picture. NNPC was founded in 1977, with mandates in exploration activities, as well as interest in refining, petrochemicals and products transportation as well as marketing. But gross inefficiency and institutional corruptions have deprived Nigeria unexplained loss of huge revenues and invariably, failed to serve the generality of Nigerians it was set-up to serve. Unlike Saudi Aramco which turned around $355.9bn revenue in 2018 out of which $111.1bn was declared as an operational profit, NNPC declared a revenue of N2.687 trillion (around $8.695bn) but the operating deficit recorded by the nation’s refineries alone rose sharply by 39 percent to N132.5bn ($428.8m) last year. While Saudi Arabia government is leveraging on Saudi Aramco for raising capital to build other sectors of the economy, Nigeria is dragging foot in opening up NNPC for investments and rid the country’s national oil from opaqueness and brazen impunity that characterised the administration of resources it holds in trust for Nigeria. Consistently, President Muhammadu Buhari-led administration promised diversification of the economy as a cardinal objective to be pursued by it, but interestingly, there have been little to suggest that it’s prepared to move away from over dependence on oil as top foreign exchange earner. As I canvassed in a previous opinion “NNPC: Between sentiments and reality”, I remain convinced that offering a stake in NNPC to investors holds great benefit for the country on a long run. In that piece, I expressed strong reservation at the shoddy management of the downstream sector by NNPC, which necessitated that “every year, trillions of Naira continue to be expended on the subsidy of petrol thereby choking resources that would have been spent on building schools, hospitals, roads, waterways, railways, mass housing, etc. If the NNPC was running efficiently in a more transparent manner. It is unfortunate that investments on activities that could directly enhance the lives of the poor masses are continually being sacrificed to entertain subsidy payment, which only benefits the few privileged Nigerians.” But that sordid situation can change. Instead of few individuals exploiting the inherent weakness of the NNPC, listing it on the floor of the Nigerian Stock Exchange will spread resources and more importantly, increase the efficiency and capacity of the oil firm to serve Nigeria. Without mincing words, Saudi Aramco have shown that it is possible and the time has come for us to drop our sentiments and take a closer look at what Atiku proposal on NNPC is all about. This is not the time to be mischievous or trying to make political capital out of critical issues, rather, Nigerians should look at the issue on NNPC from a nationalistic perspective. I’m impressed with Atiku’s honest and sincere proposal, which accurately analysed the underlining factors that dwindle the oil firm effectiveness and transparency. As against the N2.687trn reported by NNPC in 2018, the oil firm have capacity to generate between N10trn to N13trn yearly if privatized, because of the resultant minimization of costs, leakages and wastages, and maximization of revenue. Even more, privatisation and taxation on NNPC earnings will give the government the needed funds to strengthen new economies in manufacturing, industrial and agricultural sector, hence, bringing to reality the government plan on diversification and moving away from oil dependency. However, I would like to emphasise as strongly as I can that this Saudi Aramco swing holds many lessons for Nigeria. We ignore them at our peril. It has, at least, shown that as much as oil revenue is relishing, there should always be an alternative. Incredible, isn’t it? Then, we must take corrective actions to implement the learning. Beyond sentiments, NNPC should follow Saudi Aramco example and divest money raised from equities on alternate revenue sources and infrastructural developments as only this will wade-off risks that comes with oil price fluctuations. Oke Umurhohwo is a Political Analyst and Strategist. He tweets via @OkeStalyf and can be reached via oke.umu@gmail.com

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