Government pricing policy and multinational oil companies in Nigeria

For a long time there has been serious controversy between the multinational oil companies (MOCs) and the Nigerian National Petroleum Corporation (NNPC), an agency of the government, about the effect of the current government pricing policy (GPP) on the operations of the MOCs. While the MOC executives have contended that the current GPP adversely affects their efficiency, the NNPC has often accused the MOC executives of escalating their operating costs, thereby depriving the country of the maximum benefits from its oil resources. This paper employs a multiperiod goal programming model to determine the impact of the GPP on the operations, efficiency and effectiveness of the MOCs. Among other things, the model results support the claims of both the MOC executives and the NNPC. However, because cost escalation is perceived as induced by the GPP, it is suggested, for effectiveness, that the GPP be reviewed to harmonize the goals of the partners in the joint venture and adequately compensate the foreign partners, in terms of returns on their capital.