A recent oil industry report says Nigeria needs about $29 billion (N5.7 trillion) new investments in the oil and gas sector to avert a crash in its oil production from about two million to 300,000 barrels per day. While this may sound unduly pessimistic, there are real grounds for concern.
One of the dilemmas the government is facing is the need to channel resources out of the oil and gas sector to develop other sectors of the economy, while also striving to boost investments in the oil industry to ensure it continues to contribute its quota in a diversified economy.
This depressing report is, indeed, a wakeup call to government. As has been well-acknowledged, the fixation of our successive governments on oil as the mainstay of the economy and their apparent neglect of other sectors of the economy, have been the bane of national development in the country.
Now, a lot of opportunities have been lost, and liabilities have accumulated. Going by the report, Nigeria’s cash call exposures to the JVCs have reached a staggering $6.6bn and another $1.1bn to indigenous oil and gas companies. Government must find a way to meet these subsisting obligations, if it is to send the right signal on its plan to boost revenue from the oil sector.
Investing $29 billion for new investments in the next three to four years, which the report says is required to sustain our current production level, is no easy challenge, considering the parlous state of our economy. But, the government needs to fund this investment. The models which have worked elsewhere are there for us to learn from. We must encourage private-sector driven investments in the oil and gas sector.
Government should strive to find adequate local and foreign private investors for our oil and gas sector. The gas sub-sector is particularly key, given our proven potentials in it and its strategic position in the global economy now and in the foreseeable future. Ongoing investments, such as the Dangote Refinery located in the Lekki Free Export Zone which is billed to take off in the first quarter of 2018, are an indication that new investments can still be attracted into the oil sector.
Government should create enabling environment for private investment in oil. As Dangote rightly noted at the recent Katsina Investment summit, Foreign Direct Investment (FDI) will naturally follow sustained indigenous investment.
What is more? When government begins to fulfill its long-standing cash-call obligations to the JVCs, the 10Cs will get the message on the need to meet their own obligations.
As things stand, there is enough cause to worry. The renewed militant attacks in the Niger Delta have seen current oil production levels plummet from the 2016 budget target of 2.2m bpd to about 1.3m bpd. The Petroleum Industry Bill (PIB), which many stakeholders believe holds the key to new and sustained investments in the oil and gas sector has been before the National Assembly for over five years now, with the controversies over its key provisions unresolved.
With the current plunge in oil earnings and future uncertainties, there is the real possibility that new investments in the oil and gas sector may stagnate or even go elsewhere. The point has already been made that the 10Cs are global players which are not restricted by local and sentimental considerations when their investments are threatened or become unprofitable.
Government must, therefore, work assiduously with all the relevant stakeholders to provide enabling environment for increased investment in the oil and gas sector.