THE Federal Government has finally announced the cancellation of joint cash call with oil companies operating in Nigeria.
Cash calls is the counterpart funding which the Federal Government, represented by the Nigerian National Petroleum Corporation, NNPC, pays annually as its 60 percent equity shareholding in various oil and gas fields operated by international oil companies and indigenous oil firms.
What does this actually mean?
lets use an analogy, Nigeria has 5 buses which it owns 60% with other parties. the Costs of the buses eg petrol is thus shared. Nigeria pays 60% our partners pay 40%. However, Nigeria is unable to pay our cost of petrol, we owe about $6b…
Our solution ?
Allow the 40% partners operate the buses for longer hours and pay off the $6b.
look big picture, our share of that Joint Venture has fallen, because we will not share in the profits the 40% partners are generating to pay of the debt, if we own 60% of the bus, we should get 60% of the profits, simple.
If we cant fund the JV, then we should sell a portion of the venture to raise cash.
If we owe $6b, then its a debt, send the debt to the Federation Account, The DMO can and should capitalize the debt .
Read more at: http://www.vanguardngr.com/2016/11/fg-cancels-joint-venture-cash-calls-oil-coys/