Foreign investment into Nigeria’s oil and gas is still in its lowest ebb as inflow hit a low of $10.09 million in first-quarter 2020 which is still a sharp decline compared to $327.30 million recorded in Q4 2016.
Despite running an economy mostly dependent on crude oil earnings, figures obtained from public data agency National Bureau of Statistics (NBS) revealed foreign capital inflow into the oil and gas sector accounts for a miserly 0.17 per cent of total foreign investments into the Nigerian economy compared to other sectors like the banking sector contributing 51.08 percent in Q1 2020.
This means that despite obvious opportunities in the oil and gas sector, Foreign Direct Investment (FDI) is not rushing into Nigeria as the government continues to maintain a stranglehold on sectors that can attract foreign investment at the detriment of the economy and the people.
Some experts have recommended that for Nigeria to turn the tide against its declining Oil and Gas investments, there must be deliberate multi-agency efforts to bring about needed reforms. But the efforts must start with bringing credibility to both fiscal and monetary policies.
“Currency risk is preying on oil and gas investors’ minds in the current volatile environment,” Kelvin Atafiri who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector said.
The risk of currency depreciation has been the biggest worry for foreign direct investors in Nigeria since 2014 and it’s no different this year.
The naira has shed more than 70 percent since 2014 and that has been a nightmare for several oil and gas investors who manage dollar funds.
Data from NBS also revealed while the Oil and Gas sector seems to be snowballing other top five sectors to attract inflow were Shares, with $10.43 billion; Banking, $2.02 billion; Financing, $1.48 billion; Servicing, $1.29 billion; and Production, $671 million.
Atafiri noted that the government needs to make legislative reforms and properly deregulate the downstream sector which will help the government to create jobs and improve its ability to balance the books.
Nigeria has been on a perpetual voyage with Petroleum Industry Bill (PIB), a bill which holistic address most of the challenges facing Nigeria’s oil and gas sector. The bill is one its most important bills ever to be contemplated in its history in a journey that began over 16 years ago with lots of anticipation and promises.
A former Minister of State for Petroleum, Ibe Kachikwu, said Nigeria lost investments as much as $15bn yearly due to the delay in the passage of the PIB, which also means the losses may rise in the aftermath of Coronavirus.
“Getting the petroleum legislation passed is the right thing to do because investors will not invest their money if they are not sure of how they are going to get their investment back, and what benefits they can get from their investment, and how stable the investment climate is,” Group Managing Director of the NNPC, Mele Kyari said in his presentation at the 25th-anniversary edition of the Nigerian Economic Summit Group (NESG).
Before starting the year with an investment inflow of $10.09 million which is the lowest in six consecutive quarters, Nigeria’s oil and gas ended 2019 with a capital inflow of $216.23 million which was a 61 percent increase compared to $133.51 million recorded in 2018 while 2017 and 2016 figures stood at $331.36 million and $720.15 million respectively.