• Wednesday, June 12, 2024
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Drowning in oil: How bureaucracy is crippling Nigeria’s economic engine

Drowning in oil: How bureaucracy is crippling Nigeria’s economic engine

Nigeria, blessed with an estimated 37 billion barrels of oil reserves—the largest in sub-Saharan Africa—should be a beacon for global investors. Yet, an intricate bureaucracy, entangling up to 20 federal agencies in the approval process, is suffocating the sector. This regulatory morass is pushing potential investments towards smaller oil-producing nations, according to findings by BusinessDay.

The chorus of knowledgeable voices highlights a sobering truth: new investments in Nigeria’s oil and gas sector are being stifled by regulatory bodies’ turf conflicts and conflicting mandates. This industry, the backbone of the largest economy in Africa, is being choked out by a poisonous concoction of unpredictable events and bureaucratic red tape.

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Rather than an efficient and investor-friendly atmosphere, businesses encounter a maze of contradictory rules and power battles within agencies. This regulatory disarray prevents Nigeria from receiving much-needed economic advantages by discouraging new investments and impeding the expansion of ongoing initiatives. As a result, a sector that ought to be flourishing instead stutters due to the inefficiencies of its own administration. The potential for growth and prosperity is immense, but it remains unrealized as investors look elsewhere, disillusioned by the endless hurdles and uncertainty.

“This unpredictable business environment is detrimental to long-term planning, deterring both domestic and foreign investments,” lamented Ainojie Irune, Chief Operating Officer of Oando Energy Resources, during a virtual event hosted by the Centre for Petroleum Information (CPI). His words encapsulate the frustrations of many in the industry.

BusinessDay’s investigation underscores the absurdity of the current system. Investors must navigate a maze of engagements with at least 20 government agencies, each wielding its own regulatory cudgel. From the Federal Ministry of Petroleum Resources to the Nigerian Content Development and Monitoring Board, and from the Nigeria Immigration Service to the Hydrocarbon Pollution Restoration Project, the list is endless and the inefficiency palpable.

 “This regulatory disarray prevents Nigeria from receiving much-needed economic advantages by discouraging new investments and impeding the expansion of ongoing initiatives.”

The upstream sector is particularly ensnared, with firms required to interface with additional bodies like the Nigerian Petroleum Exchange (NipeX) and the National Oil Spill Detection and Response Agency. Even securing a permit for a retail petrol filling station necessitates dealing with the Nigerian Police Force.

The consequences of this bureaucratic overkill are dire. “Bureaucracy is crippling Nigeria’s oil and gas sector, leading to increased project and operational costs, delayed project completions, and a decline in foreign investment,” Irune noted, highlighting the systemic rot. Dapo Akinosun, a senior partner at Simmons Cooper Partners, painted an even grimmer picture: rampant bribery and corruption, where officials exploit bureaucratic complexities for personal gain, eroding trust and increasing operational risks.

Meanwhile, smaller African nations like Angola, Mozambique, and Namibia are seizing the moment. These countries offer a streamlined regulatory environment that is drawing growing interest from global investors. Angola, for instance, has effectively disentangled its regulatory framework by creating the National Oil, Gas, and Biofuels Agency (ANPG), separating regulatory duties from the state-owned Sonangol. This clarity and focus are proving attractive to investors.

The Nigerian government appears to be awakening to the crisis. On February 28, 2024, President Bola Tinubu signed three Executive Orders aimed at revitalising the investment climate. These orders are designed to slash the contracting cycle to a maximum of six months, aligning with global standards and drastically reducing delays. Moreover, they mandate a single-level approval process for critical stages, ensuring that approvals are issued within 15 days.

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While these steps are promising, they must be rigorously enforced. As Akinosun astutely observed, without strict penalties for regulatory bodies that miss deadlines, these timelines risk becoming mere suggestions rather than enforceable mandates.

Nigeria stands at a critical crossroads, teetering between missed opportunities and boundless potential.

To reclaim its rightful place as a premier investment destination in the petroleum sector, it must boldly confront and dismantle the bureaucratic barriers that have long stifled its growth. This means not just tinkering around the edges but undertaking sweeping reforms that streamline processes, eliminate redundancies, and foster transparency and accountability. Only then can Nigeria fully harness its vast oil reserves, transforming them into engines of economic growth and prosperity for its people.

The time for decisive action is now; hesitation only prolongs the nation’s economic stagnation. Let us seize this moment to chart a new course towards a future where Nigeria’s oil and gas sector thrives, attracting investment, creating jobs, and fueling sustainable development for generations to come.