Olufemi Adeyemi
The foreign investments in the oil sector have experienced a significant decline, falling from $720 million to $3.64 million.
In spite of the government's efforts to attract more foreign
investors to the oil and gas sector, the nation's foreign capital investments
in the industry plummeted from $720m in 2016 to $3.64m in the entirety of 2023.
The country also experienced no foreign capital investment
in the first quarter of 2024, as reported by the National Bureau of Statistics.
The report revealed that out of the $3.38bn capital importation into Nigeria in
the first three months of 2024, the petroleum industry received nothing.
Capital importation refers to the inflow of foreign capital
into a country, typically in the form of investments, loans, or other forms of
financial resources, including Foreign Direct Investment and portfolio
investment such as investments in a country's financial assets like stocks,
bonds, and securities. It can also take the form of short-term loans, deposits,
or other forms of temporary capital inflows.
The absence of capital importation in the petroleum sector
during Q1 2024 signifies a lack of foreign investment in the industry,
potentially hindering its development and growth prospects.
Despite an overall increase in total capital importation by
198.06% to $3.38bn from $1.13bn in Q1 2023, the sector that contributes the
most revenue to the country did not attract any foreign capital during the
period in question.
The banking sector led in capital inflows with $2.07bn,
accounting for 61.24% of the total capital imported in Q1 2024, followed by the
trading sector at $494.93m (14.66%) and the production/manufacturing sector at
$191.92m (5.68%).
In contrast, the marketing, consultancy, and construction
sectors received inflows of $60,000, $300,000, and $610,000, respectively,
while the oil and gas sector saw no investment.
Our reporter has learned that foreign capital investments in
the petroleum sector have been on the decline in recent years.
During the first quarter of 2023, the petroleum sector saw
$750,000 in capital importation, but there were no recorded investments in the
second quarter.
In the third quarter, the sector received $850,000 in
capital importation, and it reached a total of $2.04m in the last quarter.
Overall, the sector attracted $3.64m in capital importation
to Africa's largest oil-producing country throughout 2023.
Our reporter notes that the petroleum sector had $6.37m in
capital importation in 2022, which was lower than the amount recorded in just
one quarter of 2021.
According to the NBS, the nation accumulated $57.25m in
capital importation in Q1 2021, $340,000 in Q2 2021, $940,000 in Q3, and
$32.31m in Q4.
This brings the total capital importation for the year 2021
to $101m. Additionally, the NBS reported that the sector received $208m in
capital importation in 2014 and $29.76m in 2015.
The amount peaked in 2016 at $720m. In 2017, the nation's
oil sector attracted $331.36m in foreign capital investment. This was followed
by $133.51m in 2018, $216.23m in 2019, and $53.51m in 2020.
Experts react
A professor, Wumi Iledare, expressed concerns regarding the
decline in foreign direct investment in the oil sector. He believes that
investors remain skeptical about the effectiveness of the Petroleum Industry
Act in transforming the nation’s business practices.
Iledare mentioned that the PIA, designed to provide
incentives, was improperly executed during the previous administration of
Muhammadu Buhari. He stated that the current President Bola Tinubu has not yet
addressed the mistakes in order to make necessary corrections.
“This is expected. Investors are more concerned about the
certainty of doing business in an environment. This also has to do with the way
the PIA is being implemented. The PIA is expected to create incentives, but
they started the implementation wrongly. That is why the PIA, in my opinion, is
not doing what it is expected to do.
“So, what investors see in Nigeria is ‘business as usual’
because of the way the PIA is being implemented; and the new government did not
sit down to look at the errors of the past administration in the implementation
of the PIA. It continued with the status quo,” Iledare said.
The energy specialist emphasized the need for a clear
distinction in responsibilities between the NNPC and the regulatory bodies,
highlighting that the NNPC should function as a participant rather than a
governmental entity.
“Until you can
convince investors that it is not business as usual and you can let them see
that the governance is not fluid. If you look at the PIA, there is a separation
of roles between NNPC, the regulators, and the Minister of Petroleum who is to
drive the policy framework that creates stability in the governance.
“NNPC is not representing the government per se because it
is a player in the industry, and if they (investors) see the NNPC as people
driving the policy of the industry, then it is going to send the wrong signal.
There is supposed to be a clear separation of roles; the NNPC is supposed to be
commercial and not necessarily an agency of the Federal Government driving the
policy. The regulators should be seen to be fair and not biased towards the
government,” he advised.
The Chief Executive Officer of the NNPC Group, Mele Kyari,
has consistently attributed the dearth of investments in the oil and gas sector
to the persistent actions of oil thieves and vandals.
In a meeting held in March between the Chairman of the
Economic and Financial Crimes Commission, Ola Olukoyede, and Kyari, the latter
made a statement, “When we say illegal connections, they are not invisible
things, they are big pipes that require some level of expertise to be
installed. Some of them are of the same size as the trunk line itself. No one
would produce crude oil knowing full well that it is not going to get to the
terminal. That is why nobody is putting money into the business. So, you can’t
grow production.”
“I believe, personally, that the very purpose of your
commission is to curtail economic crimes, and there is no bigger economic crime
of this scale anywhere else than what is happening in this area,” the GCEO
lamented.