The Economist Intelligence Unit (EIU) has issued a cautionary note to indigenous oil companies eyeing the acquisition of assets from divesting international oil companies, warning them of potential investment challenges.
In its latest Country Report on Nigeria, the EIU underscored that local companies may not match the financial prowess of multinational firms, historically significant players in Nigeria’s oil industry.
Citing concerns over Nigeria’s business environment, characterized by corruption, insecurity, and infrastructure deficits, the EIU projected a possible net withdrawal of foreign direct investment (FDI) in 2024, following a similar trend observed in the previous year.
The report pointed to multinational corporations scaling back or exiting Nigeria altogether, exacerbating the economic landscape’s challenges.
Foreign oil companies, including Shell, ExxonMobil, Equinor, and TotalEnergies, have announced plans to divest their onshore oil assets, signaling a shift toward offshore operations.
This trend aligns with the broader industry shift and poses significant implications for indigenous players.
While government officials like the Minister of State for Petroleum, Heineken Lokpobiri, view these divestments as opportunities for local capacity development, concerns remain over indigenous firms’ ability to fill the investment void left by departing multinationals.
The EIU emphasized the positive potential for local participation in the sector’s indigenization, but cautioned that indigenous companies might struggle to match outgoing multinationals’ investment capabilities.
This warning underscores the imperative for strategic planning and support mechanisms to ensure indigenous firms can navigate the evolving landscape and contribute meaningfully to Nigeria’s oil industry sustainability.