Nigeria’s ruling party recommended the government discard a long-delayed oil-industry bill, review fuel subsidies and sell off some units of the state petroleum company.

The Petroleum Industry Bill should be scrapped and replaced by a new reform bill that’s based on discussions with international oil companies to “ensure all perspectives are adequately considered,” the All Progressives Congress said in a report obtained by Bloomberg on Monday. Kayode Fayemi, the APC’s policy director, confirmed the authenticity of the document.

The bill has been delayed in parliament for six years due to political wrangling and opposition by international energy companies against proposed tax and royalty terms, deterring investment into Africa’s top oil producer.

The APC handed the report, which was based on closed-door meetings on May 20 and 21 in the capital, Abuja, to President Muhammadu Buhari, who took office on May 29 and is yet to appoint a cabinet. The report “is not the final position of government,” Fayemi said by e-mail.

Buhari defeated Goodluck Jonathan in March elections on pledges to clamp down on graft, including in the oil industry, which is the source of about two-thirds of the government’s revenue and 90 percent of export earnings.

Board Disbanded

The report recommends a review of audits and corruption allegations against the state-owned Nigerian National Petroleum Corp. in the government’s first 100 days in office. After 18 months, the government should seek to commercialize the NNPC, possibly partially listing the entity and selling off its fuel-retailing and refining business, the APC said.

Buhari disbanded the NNPC’s board last week in an attempt to fight graft in the industry. Two calls to the mobile phone of Ohi Alegbe, an NNPC spokesman, didn’t connect on Monday and he didn’t immediately reply to an e-mail seeking comment.

The APC report recommends that all top oil executives, senior NNPC staff and government officials must declare their assets. It also calls for the state oil company’s board to meet more regularly and legislation governing the NNPC to be amended to ensure that the petroleum minister is no longer chairman of the company.

The government should review fuel subsidies to reduce costs of about 600 billion naira ($3 billion) spent annually on the payments, according to the report. Buhari said last week his government is facing severe financial strain from a Treasury that’s “virtually empty” and billions of dollars in debt.

NNPC Debts

A lack of oil refining capacity means Africa’s largest economy subsidizes gasoline imports and suffers frequent fuel shortages even though it produces about 1.9 million barrels a day.

Nigeria’s crude production is hindered by the NNPC’s inability to pay its share in joint ventures with companies including Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA, according to the report.

The NNPC’s debts to its eight joint ventures, in which it owns majority stakes, have “ballooned over the years,” the APC said. In 2012, the state company paid $6.9 billion out of the $10.4 billion it owed. The difference of $3.5 billion was covered by loans from international oil companies, according to the report.

“These debts are costly and opaque, and they erode the NNPC’s bargaining power with” the oil companies, the APC said in the report. “Nigeria’s inability to fund its joint-venture budgets is delaying projects, reducing production, and lowering revenue collection for the nation.”

Swap Agreements

The NNPC had the worst disclosure record of 44 international and national energy companies analyzed in a 2011 report by Transparency International and the Revenue Watch Institute.

The APC’s report also advised the government to cancel in its first 100 days in office “two ill-suited and costly offshore processing agreements” that were signed in the fourth quarter with Aiteo Eastern E&P Co. Ltd. and Sahara Group of 90,000 barrels per day each.

The government should sign simpler swap agreements with “highly competent” trading companies through a tender process, according to the report.

Sahara said it wasn’t aware of the APC’s recommendation, and Aiteo didn’t immediately respond to an e-mailed request for comment.

“The parties involved remain committed to the terms of the contract, which is being carried out in line with best practice and good governance,” Sahara said in a statement.

Source: Bloomberg