The oil sector has seen low foreign direct investment (FDI) due to the delay of the passage of Petroleum Industry Bill (PIB) into law, according to Ngozi Okonjo-Iweala, finance minister and the coordinating minister of the economy.
The PIB is meant to address the problems in the oil and gas sector, to establish a new legal framework, to create an efficient and effective regulatory agency to reform the Nigeria National Petroleum Corporation (NNPC) and to develop a new set of guidelines governing operations in the up and downstream sectors.
The idea of the PIB began in 2007 following the recommendations of a presidential committee set up to carry out oil and gas sector reforms in Nigeria
“We are not going to see, I don’t think, any action before the election in terms of passage of the PIB, but after the election. I think the petroleum sector will have more certainty and we will see FDI go up in that sector,” said the minister.
Oil Prices have reached levels not seen since the Middle East and North Africa turmoil began in 2011 because of an unusual combination of factors. With much of the government’s revenue funded by oil, funds for its capital and recurrent spending is heavily reliant on the income from the commodity, so too is its fund for savings.
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The fall in crude prices has triggered a selloff in Nigerian bond and stock markets, hurting the naira which is down almost 8.4 percent this year despite the central bank spending billions of dollars to defend it.
“We feel if we put all these measures in place, we can still withstand even though the naira has come under pressure recently. With the measures we have put in place, and supporting monetary policy, we think we can weather this storm,” Okonjo-Iweala said.
A report by IHS, leading global provider of diverse global market and economic information, said international oil majors were reducing their exposure to Nigeria’s onshore due to worsening security and lower profitability combined with continuing regulatory uncertainty.
Nigeria’s oil and gas industry would have seen huge foreign direct investment in recent times but for the non passage of the PIB that is meant to form a nucleus of Nigeria’s aspiration to become one of the most industrialized nations in the world by year 2020.
The fall in Foreign Direct Investment (FDI) inflows into Nigeria should be a cause for concern to the nation’s economic managers and a wakeup call to legislators to pass the long-stalled Petroleum Industry Bill (PIB).
According to data from the FDI report, a publication of the Financial Times, which focuses on the capital investments announced by foreign investors rather than the number of FDI projects, Africa recorded growth in FDI of 10.76 per cent to $51.98 billion in 2013.
Mozambique attracted the highest amount of FDI with $6 billion of announced investments, followed by Nigeria with $5.8 billion and South Africa with $5.4 billion.
Mozambique, the Southern African nation with significant gas reserves, has become the top recipient of FDI inflows into Africa as Nigeria’s stagnant oil and gas industry failed to attract significant investments.
Analysts say Nigeria has lost at least $28 billion since 2010 in scrapped or deferred investments in the oil sector due to a lack of movement of the PIB reforms.
Over the past few years, the growing operating risks such as crude oil theft and pipeline vandalism especially on the onshore, pirate attacks on Nigerian waters where oil vessels are usually targeted and the uncertainty in the industry engendered by the long-delayed Petroleum Industry Bill (PIB), have taken a toll on the industry.
JOSEPHINE OKOJIE
