(Ecofin Agency) - Nigeria’s President, Muhammadu Buhari, has just sent the oil reform bill to the Senate. The document provides for the privatization of the national oil company (NNPC), amendment of deepwater royalties, and the removal of key regulatory agencies in favor of new institutions.

This way, the NNPC will become a limited liability company. The government would then pay cash for the shares of the corporation and the latter would operate as a commercial entity without access to government funds. Theoretically, this will raise funds for the distressed company.

Under this reform, the royalty for offshore fields producing less than 15,000 barrels per day will be cut from 10% to 7.5%. The project provides for a price-based royalty to be applied when oil prices exceed $50 per barrel, rather than $35. The new legislation, if enacted, will make Nigeria's oil sector more attractive to investors. The country has suffered from a critical lack of new investment for more than a decade.

As a reminder, the current legislation has not been updated since the 1960s due to the sensitive nature of any changes in oil taxes, terms and conditions, and revenue sharing.