Why FG is bent on selling oil assets; the dilemma

FG considering selling oil assets to meet its 2018 budget demands

In a bid to raise sufficient cash needed to reduce the deficit for the 2018 budget, the Federal Government is bent on selling oil assets by actively considering selling some of its stakes in oil joint ventures. The 2008-2020 Medium Term Expenditure (MTEF) and the Fiscal Strategy Paper indicates that the 2018 budget (proposed to be about N8.6 trillion) is short of about N3.3 Trillion.

This dilemma dates back to 2016 when movers and shakers of Nigeria such as Alhaji Aliko Dangote, President of Dangote Group, Muhammadu Sanusi II, former Central Bank Governor, and the present CBN Governor, Godwin Emefiele, tried to convince the government to give up some stakes in the joint venture agreement or the oil refineries. At that point, Government was pressurized by activists and few lawmakers into discarding the idea.

One year many debts later and the government is considering same proposal. The proposal (oil asset sales) released by the Ministry of Budget and National Planning is contained in the Federal Government’s Economic Recovery and Growth Plan (ERGP). Selling the refineries may have been ruled out for now but giving up stakes in the joint venture with international companies is still on the table and undergoing major deliberations. FG operates seven joint venture partnerships with: Shell, Mobil, Chevron, Total, Agip, Elf and Pan-ocean.

The major challenge to this proposal though,  lies in the fact that FG still owes some arrears of cash call agreement to the tune of about $6.8 billion from 2010 and leading to 2015.