An international business research firm, the Economist Intelligence Unit, in its latest Country Report on Nigeria, observed that the indigenous companies would not have the same financial power to invest as the multinationals, who had been the major drivers of the Nigerian oil industry since its inception.
It feared that there might be a net withdrawal of foreign direct investment in 2024, as it happened in the previous year.
The EIU declared that indigenous oil companies acquiring the assets of divesting international oil companies will not be able to match their investing power.
“The wider business environment will remain highly challenging, undermined by corruption, cronyism, rampant insecurity and a giant infrastructure gap.
“Multinationals are increasingly deciding to quit Nigeria or reduce their presence; we estimate there was a net withdrawal of foreign direct investment in 2023, to be repeated in 2024 as naira losses exert pressure on balance sheets carrying large foreign liabilities,” the EIU said.
Some foreign oil companies have concluded plans to sell their onshore oil businesses to relocate offshore. Recently, Shell Plc said it had reached an agreement to sell its Nigerian onshore subsidiary, The Shell Petroleum Development Company of Nigeria Limited to Renaissance, a consortium of five companies comprising four exploration and production companies.
The Minister of State Petroleum (Oil), Heineken Lokpobiri, said the divestment by some international oil companies was a win-win situation, saying it would make room for indigenous companies to develop capacity within the onshore and shallow water spaces.
Also, ExxonMobil, Equinor, and TotalEnergies had all indicated interest in divesting their stakes in Nigeria’s onshore oilfields.
The Governor of Imo State, Hope Uzodinma, had accused the foreign oil firms of not being genuine investors, questioning their rationale for abandoning onshore for offshore. Uzodinma said it is a blessing in disguise because the more they leave, the more opportunities the indigenous companies would have to participate.
The report added, “The exodus includes oil majors who are selling onshore assets, which are high-cost and vulnerable to insecurity, leading to indigenisation of the sector over time. “Although, in principle, this is positive for foreign-exchange accumulation, local companies will be unable to match the investing power of outgoing multinationals.”
The international research firm predicted that the country’s crude oil production would rise from 1.23 million barrels per day in 2023 to 1.48mbpd in 2028, saying that “this remains about 250,000bpd below the 2019 level”.