Oil sector seen boosting economy if FG clears hurdles

Nigeria’s oil and gas sector has what it takes to deliver double-digit growth that will help lift the economy if the government will get rid of unfriendly regulations capable of stifling the sector’s potential, stakeholders have said.

Nigeria has been praised too many times as the giant of Africa, and 2023 will not be an exception. At the same time, however, the country is known to be home to millions of poor individuals who struggle to survive daily.

The oil and gas sector, which is the economy’s lifeblood, contributed 5.66 percent to the country’s total real gross domestic product in the third quarter of 2022 despite fetching over 95 percent of the country’s export earnings.

To change the narrative in 2023, business leaders have advised government officials to remove structural bottlenecks making it tough for investors to operate or deploy investments.

“Saving the oil industry will stop the bleeding of Nigeria’s economy, but this is impossible if the government agencies want to be the centre of all business discussion,” a senior business leader in the upstream sector told BusinessDay.

He said there is a general consensus among investors that the government’s handling of the asset sale deal between ExxonMobil and Seplat Energy Limited is not among a million and one respectable ways a government draws fresh investment into a sector where investments have been too few and far between.

“If a company with Seplat’s pedigree is willing to spend $1.3 billion to acquire another company, I think we should give that company a chance; if not we will kill other fresh investments looking for a new haven,” he said.

Data from the National Bureau of Statistics showed foreign investment inflows into Nigeria’s oil and gas sector has also dropped by multiple folds.

For instance, inflows of foreign investments into the sector, which stood at $200 million in Q2 2016, crashed to $1.9 million in the corresponding period of 2022, indicating a 99 percent drop.

Wunmi Iledare, chairman of the University of Cape Coast’s Institute of Oil and Gas, said Nigeria’s oil and gas sector must do away with the rent-sharing and rent-seeking mentality in 2023.

“Most of the agencies in Nigeria are personality-driven rather than having institutional empowerment,” he said. “Using non-state actors like ex-militants to tackle the activities of pipeline vandals is creating a system that will empower mini-gods in Nigeria’s oil and gas sector.”

The menace of crude oil theft had made the Nigerian National Petroleum Company Limited (NNPC) to engage a private security company, Tantita Security Service, owned by Government Ekpemupolo (Tompolo) on August 13, 2022 for pipeline surveillance.

Findings showed the security outfit has discovered over 58 illegal connections to the Trans-Escravos, Trans-Forcados, and other major trunk lines by oil bunkers in Delta and Bayelsa states.

Yet, experts say Africa’s top oil exporter is facing more danger with the federal government’s renewed romance with ex-militants.

“The contract to Tompolo will fuel militancy, which was born out of resentment in the Niger Delta, where multi-billion-dollar oil installations sit among villages of shacks perched on stilts over viscous, blackened water,” Joe Nwakwue, a former chair of the Society of Petroleum Engineers, said.

Aside from oil theft, the Nigerian oil sector has also recorded repeated fuel scarcity since the beginning of last year.

The federal government, through NNPC, has been the sole importer of petrol for several years, subsidising the product, as other oil marketers stopped importing the commodity due to the difficulty in accessing the United States dollar.

The controversial petrol subsidy regime has also remained, with the latest end date set for June 2023. In the meantime, the practice continues to dig holes in the government finances and is set to gulp a quarter of the total budget for 2023.

“More than any other period we need to fully deregulate the downstream sector in 2023,” Ola Alokolaro, partner, energy and infrastructure at Advocaat Law Practice, said.

In a document seen by BusinessDay, the Centre for the Promotion of Private Enterprise (CPPE) says the deregulation of the petroleum downstream sector is a major economic reform imperative in 2023.

“This is inevitable if we must unlock investment in the sector to put an end to the perennial fuel scarcity and the monopolistic structure of the sector,” Muda Yusuf, CPPE’s director, said.

Other experts believe Dangote Refinery may be a game changer for Nigeria if it comes on stream in 2023.

“This will not only free Nigeria of the embarrassment of having to import refined petroleum products but should also remove the lingering fuel scarcity, the pressure on foreign exchange, and above all to free Nigeria of unaccountable subsidy payments,” said Kelvin Atafiri, who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector.