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Six reasons why Seplat-ExxonMobil deal is good for Nigeria

Six reasons why Seplat-ExxonMobil deal is good for Nigeria

From higher taxes, increased production, and oil sales, Seplat Energy’s bid to buy ExxonMobil’s Nigeria shallow water and onshore assets present massive benefits for Africa’s biggest economy, BusinessDay analysis shows.

Higher taxes

Seplat Energy pays nearly $1.5 billion in royalties, taxes, and levies to the Niger Delta Development Commission (NDDC) and various community development initiatives and this is not counting its contribution to the government’s joint venture representatives’ revenue.

The acquisition of ExxonMobil assets means that Nigeria stands to receive multiples of this given the scale advantage that Seplat has.

The portfolio includes a massive 1.3 billion barrels of oil equivalent (boe) of contingent resources, 75 percent of which is gas. Nigeria has declared a decade of gas to push gas development and the development of these fields could become pivotal.

“Seplat is the leading supplier of natural gas to the domestic market and is helping to address a major obstacle facing the Nigerian economy today – access to reliable, affordable power,” said Roger Brown, the company’s CEO in a recent interview with BusinessDay.

Increased community impact

SEPLAT spends over $22 million to upgrade education, health facilities in host communities as well as support other community-led initiatives, including COVID relief. Seplat will be able to spend even more when it acquires Mobil assets.

“We have built strong relationships with our key local communities, promoting trust and confidence amongst our various stakeholders, ultimately resulting in a stable operating environment that facilitates the creation of shared value,” the CEO said in an interview.

Economic development

Seplat Energy spends over $4bn in supporting local contractors which also pays taxes and fees to the government. It spends $919m as wages and benefits to its Nigerian staff who also pay taxes to the government apart from supporting the local economy. Growth in size will bring more ability for Seplat to do even more.

Read also: How Seplat raised money to buy ExxonMobil assets

Boom to local content

Mele Kyari, the NNPC group managing director has said in the past that Seplat is a good example of what local oil firms can become. This deal with Exxon-Mobil fits that narrative very well government officials say.

Simbi Wabote, executive secretary of NCDMB in a speech on Wednesday at the 5th Nigerian International Energy Summit, said deals like Seplat and ExxonMobil means a boom to local ownership and participation in the oil industry and helps to put indigenous oil firms on the top pedestal where they can be expected to move beyond the Nigerian borders to play strong in Africa simply on account of the opportunities they have been allowed to explore at home.

At a time when the world is pivoting away from fossil, strong Nigerian oil firms will make a huge difference, he said.

Job creation

The Seplat Energy deal will enhance job creation in a massive manner as it seeks to revive abandoned assets with huge job creation potentials. It will also enhance technology acquisition and transfer in many ways.

Demonstrates improved business environment

Lack of respect for the sanctity of contracts has been identified as a major turn-off for investors in Nigeria and is a factor in determining how easy it is to do business.

The success of the Seplat Energy deal will demonstrate that the Nigerian government respects the sanctity of contracts duly agreed between private companies.

“I think the interest of the government should be to encourage foreign direct investments, upstream, Nigeria, in the face of competition from other climes,” said Ayodele Oni.

Doing otherwise will further drive a wedge between Nigerian and foreign investors at a time Nigeria can do with attracting more foreign direct investment into the country.