Petroleum Corporation seeks CBN's support on industry reforms

The Nigerian National Petroleum Corporation (NNPC) has solicited the cooperation of the Central Bank of Nigeria (CBN) in the ongoing reform of the oil and gas sector for it to impact positively on the Nigerian economy. Mohammed Sanusi Barkindo, the Group Managing Director of the NNPC, made this move when he visited the CBN Governor, Sanusi Lamido Sanusi, on Wednesday in Abuja.

"Our industry, together with yours, has been intertwined for as long as I can remember and for us, in the Nigerian economy the duo are inseparable, Mr. Barkindo said. "When we embarked on the reforms in the oil and gas sector, it became obvious that the reform must include the reform in the financial sector. The impact of the financial market on oil and gas has become more and more evident even before the global melt down."

He described the reforms in the petroleum and banking industries as major catalysts that are critical to the economic growth and development of the country.

Mr. Barkindo blamed the devaluation of the U.S. dollar on "the complete disconnect between the oil market and the demand-supply fundamentals in 2008, which led to several abnormalities in the global financial sector.

"Coming back home, we have seen the challenges of post consolidation. We have seen how the financial market impacted on the marketing sub-sector. Therefore, the implementation of the Petroleum Industry Bill, when passed into law, the reform that will sweep through the oil and gas sector would be massive and can only be achieved with a holistic synergy with the banking sector."

The NNPC boss stressed that for the petroleum industry bill to succeed, there is a need for the corporation to partner with the banking sector in the country.

Sanusi expresses support for deregulation

Responding, Mr. Sanusi said that reforms are always confronted with challenges. He said the Central Bank will partner with the NNPC in its effort to transform into a world class profit-making National Oil Company that will boost the national treasury.

"For us in the CBN, we are totally in support of the PIB and we are totally in support of deregulation of the downstream sector of the petroleum industry because, it will create a conducive environment that will ultimately attract investors into the Nigerian economy," the CBN governor enthused. Mr. Sanusi urged the NNPC boss to continue with the reforms in the petroleum sector irrespective of the prevailing challenges as experienced in the banking sector in Nigeria.

Reason for industry reform

Over the years, the NNPC has been operating both as an industry regulator and a key player in the joint ventures which has rendered it ineffective. The reform is aimed at stripping the NNPC of the regulatory role, in order to make it concentrate on the core areas of exploration, production, refining and marketing, in line with other international national oil companies.

Its operations will be recapitalised, and it will not just be involved in joint ventures as is the case currently, but will be involved in independent production, and will pay taxes to the federal government as a corporate citizen.

The Petroleum Bill seeks to create new regulatory agencies and transform existing institutions into efficient and profit-oriented enterprises.

The NNPC boss said that when passed into law by the National Assembly, "The PIB would transform the NNPC from a cost centre to a profit centre that would be capitalised into an Incorporated Joint Venture, in a bid to move from a quasi-government agency to a well run National Oil Company."

Mr. Barkindo described the reform envisioned by the Bill as the most comprehensive in almost 50 years of oil exploration in Nigeria. He lauded President Umaru Musa Yar'Adua for his reform agenda targeted at key sectors of the economy. He said the reforms will bring the Nigerian oil and gas industry into global reckoning.