In Q2 2021, the National Bureau of Statistics (NBS) reported a notable absence of Foreign Investment in Nigeria’s oil and gas sector, marking the first time it recorded zero capital importation during that period. The report highlighted the Federal Government’s inability to attract investments from International Oil Companies (IOCs) in the sector from January to June,leadership report.
This revelation coincided with global efforts to transition towards cleaner energy, prompting various IOCs to divest from traditional oil and gas operations. The NBS report underlined the lack of foreign capital inflow into the sector during the review period. This trend aligned with the broader movement of IOCs, including indigenous oil companies, repositioning themselves as energy firms as part of the commitment to the United Nations agenda aiming for zero emissions from fossil fuels by 2050.
The consequences of diminished investments were evident in Nigeria’s crude oil production, which experienced a significant decline, particularly post-COVID-19. Production plummeted to around 900,000 barrels per day in September of the previous year before recovering to approximately 1.3 million barrels per day in September, as per data from the Organization of the Petroleum Exporting Countries.
The NBS disclosed that Nigeria recorded $1.03 billion in capital importation in Q2 2023, representing a 32.9% decrease compared to the $1.54 billion recorded in the same period in 2022 and slightly lower than the $1.13 billion in the preceding quarter. Loans constituted the majority of foreign inflows at 74.9%, with foreign direct investment contributing $86.03 million (8.4%) and foreign portfolio investment amounting to $106.85 million (10.4%).
Traditionally a significant revenue source, the oil and gas sector contributed over 90% to Nigeria’s foreign exchange earnings. However, in Q2, the manufacturing sector attracted the highest foreign inflows with $605.04 million, followed by banking with $194.58 million, and the stock market with $68.63 million.
Noteworthy is the trend of IOCs divesting their oil and gas assets in Nigeria. Most recently, Italian company Eni agreed to sell its subsidiary, Nigerian Agip Oil Company, to Oando. According to the British research and consulting firm Wood Mackenzie, international oil firms’ divestments in Nigeria amounted to £871 million since 2020.