Nigeria’s Oil and Gas Sector Fails to Attract Foreign Investment Amid Global Energy Transition

Nigeria’s oil and gas sector witnessed a notable absence of foreign investment in the second quarter of 2021 as international oil companies (IOCs) remained reluctant to commit to the sector.

This unprecedented occurrence comes amid the global shift towards cleaner energy sources, as nations worldwide work toward reducing emissions from fossil fuels.

The National Bureau of Statistics (NBS), in its ‘Nigeria Capital Importation Q2’ report, revealed that the Federal Government struggled to persuade IOCs to invest in the country’s oil and gas sector between January and June 2021.

The report indicated that no foreign capital was imported into the sector during this period.

This development reflects a broader trend of divestment by IOCs from fossil fuels to cleaner energy options and investments in neighboring countries.

The international push for net-zero emissions by 2050, aligned with Nigeria’s pledge to achieve net-zero by 2060, has prompted significant rebranding within the industry, with many companies transitioning into energy firms.

The lack of foreign investments has taken a toll on Nigeria’s crude oil production, which saw a significant drop, particularly in the wake of the COVID-19 pandemic.

Crude production decreased to approximately 900,000 barrels per day around September last year but showed signs of recovery, reaching around 1.3 million barrels per day in September, according to data from the Organization for the Petroleum Exporting Countries.

However, Elliot Ibie, President of the Nigerian Association of Petroleum Explorationists, attributed the decline in investments to factors such as post-COVID-19 challenges, security issues, pipeline vandalism, oil theft, and delays in the passage of the Petroleum Industry Act.

NBS data indicated that Nigeria recorded $1.03 billion in capital importation in Q2 2023, representing a 32.9 percent decrease compared to the $1.54 billion recorded in the corresponding period of 2022.

While the manufacturing sector attracted the most foreign investment in Q2 with $605.04 million, the oil and gas sector’s continued struggle remains a matter of concern for the country’s economic stability.

Various IOCs have divested their oil and gas assets in Nigeria in recent years, amounting to significant financial transactions. As Nigeria grapples with these challenges, President Bola Tinubu has emphasized the importance of attracting investments to the sector, pledging to fulfill that commitment.