Nigeria advised to overhaul oil sector

Nigeria advised to overhaul oil sector
Updated 07 July 2015

Nigeria advised to overhaul oil sector

Nigeria advised to overhaul oil sector

JOHANNESBURG: Advisers to Nigerian President Muhammadu Buhari have recommended a root and branch overhaul of Africa’s biggest oil industry and increased borrowing to help pay off $20 billion of government arrears, a reform proposal document shows.

Buhari, who won a shock election victory in March, has so far given little indication of his policy agenda as he has focused on his main election pledges of tackling corruption and a six-year insurgency by Islamist sect Boko Haram.
A ‘transition committee’ set up by Buhari in April submitted 800 pages of policy recommendations to the president last month but the details were not made public.
Among its recommendations were slashing the size of the civil service, overhauling the much-criticized state oil company and removing costly petrol and kerosene subsidies, according to an executive summary obtained by Reuters.
Buhari should appoint a “Reform Czar” within the president’s office to oversee changes, the committee suggests.
“Time is of the essence, and expectations are high. The administration must act now,” the report says.
The paper lays bare the dire state of public finances in Nigeria, which has been hammered by a halving of oil prices last year. Nigeria relies on oil exports for 80 percent of government revenues and 90 percent of foreign exchange earnings.
Nigeria has arrears totalling 4.1 trillion naira ($20.6 billion), including 400 billion naira in unpaid salaries, 200 billion in arrears to fuel importers and 1 trillion naira to the oil industry, the paper shows.
The committee recommends paying salary arrears and fuel subsidies immediately to avoid “mass labor unrest.”
The accountant general said on Monday he would share $1.7 billion from the oil savings account between the three tiers of government to cover outstanding arrears, suggesting the committee’s proposals are being implemented.
Paying government arrears should be funded by issuing 600 billion naira in bonds, restructuring existing debt and renegotiating or scrapping some government contracts.
“The incoming government will therefore have very limited resources and a plethora of challenges to address,” it said.