This is how Nigeria lost $21bn in oil Investment in 2015
Nigeria reportedly lost about $21bn in oil investments due to the fall in oil prices in 2015. This was made known by oil industry operators who met in Lagos to discuss the issues affecting the industry. They emphasized the need to improve the country’s investments by addressing insecurity, contract approval processes and fiscal terms.
The fall in global oil prices has continued to affect several economies. The worst hit have been countries whose economies depend solely on oil for a significant percentage of their foreign exchange earnings. Some of these countries include Venezuela, Angola, Azerbaijan, Ecuador and Nigeria.
The Nigerian oil and gas industry, which has lost about $21bn in capital investment since late last year due to the dwindling oil prices and lack of investor confidence in the country, needs to look inwards in order to compete globally for shrinking investment.
Here is how Nigeria lost $21bn in oil investment:
Capital investmentsin the oil and gas industry has dropped by 20 to 25 percent globally, in response to the low oil prices. Apart from the lack of investment in the sector, the government’s inability to put measures that will fast-track implementation of projects has significantly impeded the growth of the oil industry.
Nigeria is said to have the longest contracting process in the world. It takes between two to three years to conclude a process of awarding a contract for a project. As a result of the longevity of time, initial budgets of most projects are altered and reviewed upwards, making investment low and project costs in Nigeria extremely high.
Probable solution to the problem
The Nigerian government needs to restore investor confidence by making sure there is competition in the domestic oil market. Nigeria,which has an attractive resource base, should solve joint venture funding challenges and pay back arrears.
Investment is paramount to any country’s development. In order for Nigeria’s oil and gas industry to attract investors, the government needs to ensure the safety of lives and properties, provide globally competitive fiscal terms, control stability and also make approval processes very easy.
“If there is anything that makes an operator nervous, it is the security issue,” said the Managing Director and Chief Executive Officer of Seplat Petroleum Development Company Plc., Mr. Austin Avuru during the event.
If the government puts all these in place there will be massive improvement in the oil and gas industry over time as investors would find the country more attractive over time.
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