Saudi Aramco Is Worth $2 Trillion! – Hello NNPC Plc

Saudi Aramco Is Worth $2 Trillion! – Hello NNPC Plc

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.

In September, Public Investment Fund (PIF) Governor and Aramco Chairman Yassir al-Rumayyan had said that the IPO would not be delayed and could occur anytime within the next 12 months.

The purpose of the IPO is to put Saudi Arabia on the fast track to diversifying its economy away from oil and transforming key sectors including mining, healthcare, and tourism in line with Vision 2030.

“If Aramco is not put for IPO, it means it will take us 40-50 years to develop the mining sector. It will take us 40 years until we develop the local product and it will take us long years to develop logistical services, just like we wasted 40 years in the past while trying to develop these sectors,” Crown Prince Mohammed bin Salman said in an interview broadcast on Al Arabiya back in 2017

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.

NNPC Plc – Nigeria Should Take NNPC Public To Boost Transparency

Advertisements

Share this post

3 thoughts on “Saudi Aramco Is Worth $2 Trillion! – Hello NNPC Plc

  1. Do Nigerians even know whether NNPC is for-profit venture or just a government agency? We don’t even know NNPC’s business model, if it has one anyway.

    All we know is that NNPC is into Oil business, what it does there is still not clear; that tells you a lot about how convoluted the never-do-well corporation is.

    If you enquire now, you find out that it is in debt, always struggling to fulfil its part of JV agreements. Of course it’s paying petrol subsidy in an autopilot format, where you cannot even put a cap on how much it spends there…

    The president is the petroleum minister, but NNPC has remained the same, just like Nigeria; whatever that is holding must be very strong then.

    Many things here must go through serious exorcism, if Nigeria must be lifted up. To think that we are normal people must be an aberration.

    Reply

Leave a Reply