The National Economic Summit Group (NESG) has expressed strong support for the Nigerian National Petroleum Corporation?s (NNPC) planned Initial Public Offering (IPO), hailing it as a crucial step toward driving transparency and reforming the country?s oil sector.

However, it has voiced significant concerns over the cancellation of the naira-for-crude policy, warning that the move could exacerbate Nigeria?s already fragile foreign exchange (FX) pressures.

The economic think tank, which plays a key advisory role in shaping policy discussions, called the NNPC IPO a forward-thinking initiative that could enhance transparency, attract foreign investment, and improve the operational efficiency of the state-run oil giant.

Tayo Aduloju, Chief Executive Officer (CEO), lauded the planned IPO as a vital move for the transformation of NNPC, which has long been criticized for inefficiencies and lack of transparency.

By listing the corporation on the Nigerian Stock Exchange, the government aims to reduce its stake in the company and bring about market-driven reforms that could help unlock value and improve management practices.

He said the NESG has consistently advocated for taking the NNPC public to transform it into a more transparent and accountable Nigerian asset.

?The more transparent it is, the more it complies to international corporate governance requirements, and the very likely it works better for all Nigerians,? Aduloju told a media conference at the weekend in Abuja.

?Any move in this direction is highly commendable,? he remarked, referencing Saudi Aramco?s transformation several years ago, which revamped its operations and achieved improved outcomes.

He highlighted Saudi Aramco as an excellent benchmark, noting that when a similar initiative was launched, it triggered a comprehensive audit that led to a significant cleanup. This process eliminated opportunities for corruption, streamlined the institution, and enhanced transparency.

He said once this transformation is achieved, the asset becomes highly attractive to portfolio investors and can be listed on internationally recognized stock exchanges.

This shift, according to him, significantly alters the trajectory of the asset, unlocking its full potential.

He emphasized that the NNPC is a critical national asset and must be managed with stringent prudential measures to enhance its competitiveness on a global scale.

?It?s a highly welcomed development, and I hope they fully commit to seeing it through.

?Let?s embark on this journey,? he declared, applauding the president and all stakeholders involved in the initiative while urging them to remain steadfast and focused on the path forward.

Despite the positive reception of the NNPC listing, NESG expressed deep reservations about recent decision to halt the naira-for-crude policy, arguing that the cancellation may have unintended consequences for Nigeria?s currency and oil revenue dynamics.

The policy, which allowed oil exporters to trade Nigeria?s crude oil in naira instead of U.S. dollars, was initially introduced as a way to stabilize the local currency and reduce Nigeria?s reliance on the dollar.

The cancellation of the policy, which was supposed to strengthen the naira, has been viewed as a step backward in Nigeria?s broader foreign exchange strategy.

The Group specifically warned that scrapping the initiative could lead to more significant challenges in managing Nigeria?s fx reserves, which have been under pressure due to fluctuating oil prices and low foreign currency inflows.

?This cancellation is a misstep that could exacerbate Nigeria?s already precarious fx situation,? Aduloju stressed.

According to him, the NESG generally supports the crude-for-naira initiative, provided that transactions adhere to prevailing market rates and avoid creating a hidden foreign exchange subsidy.

?It solved the question of local production needs chasing fx. You can imagine where a big player like Dangote is chasing fx every day to buy crude. That automatically changes the level of pressure in the market, and it can be disruptive.

The policy was deemed effective for several reasons, he explained. It eased the pressure on foreign exchange demand and supply, enabled transactions to be primarily conducted in naira, and allowed for a clear naira-based cost of PMS production.

This structure also facilitated consistent reductions in pump prices by suppliers like Dangote. However, when the policy was suspended, prices began to rise again, with marketers signaling plans to sell products in dollars, Aduloju highlighted.

?That journey is going nowhere to help no one. So we encourage the committee to revisit the broad framework.?

He, however, acknowledged the challenges faced by stakeholders negatively impacted by the ongoing reforms, particularly tank farm owners who had made significant prior investments.

He urged the government to consider the broader implications, expressing concerns that the shift in production and distribution models could have far-reaching consequences for tank farms, which are crucial in storing and distributing petroleum products across Nigeria.

He emphasised that the entire tank farm subsector of the downstream industry was established based on a government policy to import refined PMS.

However, with Dangote now entering the market, selling directly from the terminal to trucks, an entire subsector that has existed for nearly four decades is effectively being eliminated.

?The question is, what will happen to these businesses? The regulator must establish a clear framework for addressing the sectors that become obsolete due to government reforms, much like what was done in the telecommunications industry,? the CEO stressed. (BusinessDay)

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