Debt May Complicate Reform of Nigerian State Oil Firm, FSDH Says

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LAGOS (Capital Markets in Africa) -The Nigerian state-owned energy company’s debt burden will become “a political hot potato” when the firm is overhauled under new legislation, FSDH Capital Ltd said.
The Nigerian National Petroleum Corp.’s current liabilities exceed its assets by 4.56 trillion naira ($11.1 billion), according to its 2020 financial statements. President Muhammadu Buhari last month signed a law that aims to transform the energy industry in Africa’s biggest oil producer, including replacing the NNPC with a commercially oriented limited liability company.

“The key unanswered question surrounding NNPC’s future is what will happen to the liabilities of around $11 billion owed to its joint venture partners, including funding shortfalls,” FSDH Capital said in a research note on Monday. The petroleum resources and finance ministers are required to decide which of NNPC’s assets, interests and liabilities will be transferred to the successor company, and to develop a framework for paying down liabilities that are retained.

The “lack of clarity will concern NNPC’s main creditors,” including Royal Dutch Shell Plc, the Lagos-based investment bank said. “There is every possibility that NNPC’s liabilities will become a political hot potato that will be passed around the various decision-making bodies, and left unresolved.”

 

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