Nigeria, one of the top oil producing countries in Africa with an estimated reserve of 37 billion barrels by the Organization of Petroleum Exporting Countries was Africa’s second-largest oil producer in 2022, as well as the biggest oil producer and consumer in West Africa. Recently, there has been the troubling situation, with the fall in the daily oil production from 1.2 million barrels per day in February to less than a million in August 2022 and then rebounding back to 1.2 million daily production in January this year. The resilience of the oil sector has been duly affected by global and domestic forces.
Globally, the Ukraine-Russia war has impacted the supply of energy globally due to foreign sanctions and the withdrawal of investments. Domestically, the recently concluded presidential election has been tipped to play a huge role in the future of the oil sector. With President Buhari’s administration, ravaged by theft and immense inefficiencies within the sector, Bola Tinubu, the President-Elect will be looking to fill the void left by Russia. The Buhari administration have found it increasingly hard to capitalize on the country’s energy resource potential. The president once claimed that the country missed out on a potential investment which was worth about $50 billion, as a result of the delays in passing the petroleum industry bill.
Oil theft compounded other challenges in the Buhari administration.
Surveys in the Global Energy Law and Sustainability also indicated that this resulted in international oil firms keen on “offshore development and the corrupt government willing to exploit it.” The research showed that due to this, many firms jeered towards exploiting the numerous resources by demanding favorable conditions for investing in Nigeria’s oil. Whilst these firms made proposals that would benefit them and the country, Nigeria’s dependence on direct foreign investment weakened its role. These challenging situations were further compounded by the recurring oil theft that the Nigerian National Petroleum Company faced during the Buhari administration. According to Globaldata, Nigeria lost about 470,000, amounting to $700m monthly due to oil theft. In fact, Angola moved ahead of Nigeria among Africa’s biggest oil producers.
The Manager of National Petroleum Investment Management Services, Bala Wunti, noted that the reduction in production was as a result of security challenges. With reports that criminals tricked workers into working in illegal refineries, Wunti disclosed that the routine investigations found that these workers were handed fake employment letters. Azubuike Ahubelem, the leader of the Petroleum and Natural Gas Senior Staff Association of Nigeria blamed the federal government for the recurring cases of oil theft. The transition of the NNPC from state-owned to being a privatized organization in 2022 for enhancing access to international market has culminated Nigeria’s oil and gas struggle.
Fuel scarcity and cash crunch have also caused havoc for Nigerians.
Moreover, this hasn’t been the only source of problem and uncertainty in the country. In the face of the election, certain policies created havoc for most Nigerians. The fuel scarcity and cash crunch being major havocs. The electioneering body alerted the public that the shortage of fuel and cash crunch could disrupt the distribution of logistics and payment of logistics staffs respectively. These concerns were evident in the concluded presidential election, as the process was marred by violence and other electioneering malpractices.
Bola Tinubu’s win has however left many citizens bewildered. Despite the scores of the candidates, the low voter turnout did mar the result. Right now, the win is being challenged in the Court of Appeal by 5 different political parties. The present uncertainty is definitely doing so little for the country. JD Supra reported that the upstream, downstream and midstream was in different licensing categories since February. With this, firms with a single project license would have to apply for new specific licenses to cover the parts of the supply chain.
European countries looking to buy oil from countries beyond Russia.
However, the hesitancy of the world economies to invest largely in fossil fuel has caused Nigeria to push for international investments worth about $100 billion for its transitioning into solar expansion and double gas power generation. A spokesperson at Auerbach Grayson indicated that the recurring challenges in Nigeria had discouraged imminent foreign investments. Many investors also had preferences for the presidential election, predicting a smoother transition of power to Bola Tinubu as elected. Regardless of the outcome of the appeal, European countries are looking to buy oil from countries beyond Russia and this can give Nigeria the opportunity to expand its oil sector.
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