Despite higher crude oil prices and the current reconfiguration of the global oil market, foreign investment into Nigeria’s oil and gas has dropped by 82 percent to a new low of $1.93million in the second quarter of 2022.
Data from the National Bureau of Statistics (NBS) revealed the total value of foreign capital attracted by the petroleum industry in the second quarter of 2022 fell from $11.3 million in Q2 2021 to $1.93 million in Q22022.
This development is an early sign that the government’s revenues are set for a seventh straight year of underperformance despite oil surging as much as 50 percent from the start of 2022 and averaging $113 in Q2.
The NBS’s data also showed foreign capital inflow into the oil and gas sector accounts for 0.13 percent of fresh foreign investments into the Nigerian economy in Q2 2022 compared to other sectors like the banking and production sector contributing 42percent and 15 percent respectively.
Ola Alokolaro, partner, energy and infrastructure at Advocaat Law Practice, said this development marks “the lowest level” for Nigeria in 11 years. The country thus carried the weak investment momentum it experienced in 2021 into 2022.
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“Capital inflows into Nigeria “have been anaemic”, and worse still, “given Nigeria’s structural constraints, foreign inflows may likely continue to lag its emerging market peers for the foreseeable future,” Alokolaro said.
Other analysts say a wave of divestment in Nigeria’s oil and gas sector has dampened the investment outlook in Africa’s biggest economy as foreign investors withdraw from the country’s main source of growth and capital.
Last week, Italian oil giant Eni agreed to acquire two producing fields in Algeria for an undisclosed sum, including stakes in two major natural gas projects, as it plans divestments away from Nigerian onshore assets, a development that illustrates how Nigeria is losing the war to attract investments into its oil sector to smaller oil-producing nations.
For a frontier market with the population of Nigeria, oil majors not looking in its direction should be a big worry for the government as it has dire implications for social welfare and economic growth.
Experts say Nigeria is punching below its weight in terms of attracting the right kind of investments in its energy sector, as foreign investment now accounts for just a fraction of Africa’s biggest economy, with policy uncertainties and security issues also weighing on the mind of overseas investors.
“The significant drop in investment by these IOCs in Nigeria goes beyond capital discipline alone,” Simon Anderson, director, performance improvement sub-Saharan Africa at Wood Mackenzie, said in a note.
It said, “Some Nigeria assets may be under-invested, resulting in potential upside opportunities.”
Nigeria has the capacity to pump around 2.2 million bpd of crude and condensate but in recent months, its output has been languishing below 1.55 million bpd. The country only pumped 1.1 million bpd of crude, according to the Organisation of the Petroleum Exporting Countries (OPEC).
