• Friday, March 29, 2024
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Oil industry attracts three year low foreign investment of $133m

marginal oil production

Foreign investment flow into the Nigeria petroleum industry has dropped to a three low of $133 million in 2018 which is also a sharp decline of 59.82 percent compared to $331 million recorded in the same period in 2017.

Data obtained from the National Bureau of Statistics (NBS) 2018 Nigerian Capital Importation report, revealed that foreign capital inflow into the oil and gas sector accounted for 0.79 per cent of total foreign investments into the Nigerian economy which was lower compared to 2.71 percent of total foreign investment in 2017.

Data from NBS also showed that capital importation into the oil and gas sector is yet to reach its 2016 peak of $720.15 million which was lower compared to $331.36 million in 2017 as 2014 and 2015 figures stood at $208.18 million and $29.76million respectively.

Further analysis has showed that in the first quarter of 2018, $85.62 million was imported into the oil and gas industry, dropped by 15.3 percent from $101.08 million recorded in the corresponding quarter of 2017 while capital imported in the second quarter of 2018 declined by 86.9 per cent from $190.39 million in the second quarter of 2017 to $24.85 million in 2018.

Capital importation in the third quarter of 2018, stood at $7.73 million which was 51.9 percent lower than $16.07 million recorded in third quarter 2017 while in Q4, it also decreased by 35.75 percent to $15.31million in 2018 from $23.83 million in corresponding period of 2017.

Also, analysts had consistently blamed the decline in investment on uncertainty in the industry, following the delay in the assent of the Petroleum Industry Governance Bill (PIGB), and the non-passage of the remaining variants of the Petroleum Industry Bill (PIB).

“Foreign investment in Q3 was driven by importation of submersible drilling machines for the Egina Floating Production Storage and Offloading (FPSO) from French major Total while in Q4 the high risk in the economy and a combination of many factors like policy directions made investors to pull out their funds out of the economy,” Gbolahan Ologunro, an investment analyst at CSL Stockbrokers told BusinessDay.

Ologunro explained that the long-awaited passage of the Petroleum Industry Bill (PIB) is one of the key reforms investors looking forward to that will see significant inflows. “The power sector is another key sector where investors expect that if government can get its hand completely off that sector by ensuring tariffs are cost-reflective then you will see more players making investment across the entire value chain.”

Investments experts disclosed that investors are skeptical about investing in the nation’s petroleum industry as a result of the uncertainty trailing general elections.

Ayodele Akinwunmi, head of research at FSDH Merchant Bank said generally, investment policies are more relevant to foreign direct investors than how yields are performing because they relate more to the long term developments in the economy than short term developments.

“When the elections is over, whoever wins whether the opposition or the incumbent they will face the reality but again it is still going to be affected by what is going on with global oil price,” Akinwunmi told BusinessDay by phone.

Nigeria oil and gas sector gathered momentum in 2018 following the successful sail-away of the Egina’s FPSO in 2018; anticipated to increase Nigeria’s oil production by 200,000 barrels of oil per day.

 

DIPO OLADEHINDE