Lower oil prices driving oil-producing nations to tap public markets to diversify their economies as Nigeria dithers

*As Saudi Arabia, others plan listing state oil coys…

The current lower energy price regime is pushing governments dependent on oil revenue to tap public markets as a way of plugging holes in their budgets. The Middle East nations are in the forefront of this development as many of them are looking to this tactic to diversify their economies.

Businessamlive specifically learnt that Saudi Arabia has finalized plans to list its state oil company, Saudi Arabia Oil Co, also known as Aramco, which has already sparked a rush to privatize in the Middle East.

The coming IPO, first announced in 2016, has influenced other countries to look at listing their own assets, company and state officials say.

“Saudi Arabia’s plan to list Saudi Arabian Oil Co. is sending other Middle Eastern nations rushing to raise capital on equity markets, potentially privatizing swaths of the state-run energy industry for the first time,” said reports monitored by Businessamlive.

In the Gulf region, many governments have already issued bonds but they are now turning to equity markets, a move, analysts say, may have been hastened by the initial public offering of five percent of Saudi Arabia’s oil the company, also called Saudi Aramco.

Already this year, there have been 32 IPOs in the Middle East, raising $1.5 billion, according to data provider Dealogic. That is more deals than during the two previous years combined.

Once listed, Aramco is expected to be the world’s largest company by market capitalization.

The development, according to analysts, indicates the importance and role of the market as a driver of growth in an economy. They say the current moves in the Middle East are in the right direction and they are calling on the Nigerian government to list the state oil company, the Nigeria National Petroleum Corporation (NNPC).

Most analysts say since the corporation has become a symbol of corruption and inefficiency, it would be better it be privatized for government to diversify its revenue base including taxation.

“It is perhaps the biggest government business that is a catalyst for corruption, waste, and laziness. Without NNPC, the government will focus on taxation as a major source of revenue and with taxation comes accountability to the electorate,” an analyst said.

Selling state-owned assets is not a new phenomenon in Nigeria as governments have successfully sold power assets and others, which would encourage global fund managers to be exposed to the Nigerian oil industry, and this will bring new options for those funds looking to put money into the global energy sector.

Again, the Nigerian stock markets have rallied in recent times and rank well in emerging-market index performance, which would put an NNPC IPO in good stead.