Saudi Arabia’s Aramco, the world’s largest oil producer, will start trading in Saudi Arabia on December 11, according to the state broadcaster Al Arabiya. Aramco, valued at $2 trillion, plans to raise $100 billion through its offer of a 5% stake.
It aims to raise up to $100 billion from the IPO of a five percent stake of the company, based on a $2 trillion valuation. This valuation could make it the most valuable company in the world. This valuation would put Aramco at a staggering 400 percent greater than the current largest IPO of Ali Baba, which happened in 2014.
Can Nigeria try this playbook to boost transparency in the energy sector? That will not happen because NNPC has no quantifiable value since NNPC is Nigeria! This was my conclusion when I tried to examine NNPC Plc: ‘That is the most unfortunate thing about Nigeria, and the reason why NNPC Staff, the Labour Union and students will say “HELL NO, DO NOT DO IT”’. Yet, there are many benefits for taking NNPC public. Some are:
Governance: Taking NNPC public will improve its governance especially if it is listed in a foreign exchange like London Stock Exchange and New York Exchange besides Nigerian Stock Exchange. That improved governance will help its impacts to the Nigerian people. I do think it will return higher value to Nigerians compared to what we get today. But there is risk: you do not want excessive market activism on a national corporation.
Liquidity in NSE: The Nigerian Stock Exchange will benefit with a listed NNPC. It will bring liquidity in the exchange. I promise you that NNPC Plc will bring many Nigerian retail investors back to the bourse.
Human Welfare: Through better governance and transparency, Nigerians will win through improved human welfare: yes, more money will be remitted and paid to the Nigerian people, on time.
Financials: The NNPC financial management will have higher discipline with severe implications, as deviating from standards can be considered a financial crime.
Capital Funding: NNPC and Nigeria will likely raise billions of dollars which can go a long way to finance important capital projects. An IPO by NNPC will bring liquidity to modernize our infrastructure. It will be a great moment in our history if the leadership utilizes the money well.
Profit-Center: In markets, NNPC will be managed as a profit-center where the leadership will be tasked to run it efficiently so that Nigeria and the investors will make money. Today, it is largely a cost-center with no meaningful balance sheet.
Investors Win: I do not have the total reserves of NNPC and the correct books to calculate how much profit it could make in a year, but I know that we could be looking in billions of dollars. Also, we need to know the present revenue and cost elements to model the profits. But no matter what, NNPC makes money and investors will see glory. If they do not presently make money, no one will be talking of missed remittance into the Federation Account.
Of course, there are grave risks for trying just that for Nigeria as I noted. Saudi Arabia may be executing a game plan; it could be a great exit before that future of constrained oil arrives. Just today, we are learning that weak oil prices have hit BP’s profits. Weather has also contributed to the lower profit, delivering a double whammy. BP reported a 41% drop in Q3 net profits.
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