Some stakeholders have expressed cautious optimism about the reported plans by Saudi Arabia to invest in Nigeria’s oil and gas industry, especially in overhauling the refineries, and are calling on the Federal Government to make public details of the agreements between the two countries on the deal.
They said the plan might not materialise except the Nigeria government urgently take steps to tackle some challenges in the local oil and gas sector that scare investors.
In a move that could see the oil-reach Arab country expanding its presence in Africa, Saudi Arabia is reportedly planning to spend about $25 billion in Nigeria and other African countries in the next seven years. It was learnt that about $10 billion has been voted to finance and insure Saudi exports through 2030, and an additional $5 billion has been set aside for development financing.
The stakeholders in Nigeria expect the olive branch from Saudi Arabia to force the President Bola Ahmed Tinubu administration to address the lingering challenges in the oil and gas industry in Nigeria. They lamented that while the country is looking for fund across the world, the companies operating locally are exiting the country due to security challenges, unfriendly foreign exchange management, corruption, poor regulatory environment, fiscal policies, multiple taxes, subsidy payment on petrol, among others.
The stakeholders urge the Federal Government to reveal the details of the deals with Saudi Arabia, saying the plan must be transparent and properly communicated to Nigerians to guide their expectations.
Last week, Nigeria and Saudi Arabia agreed to a number of investment and cooperation deals. One of the agreements is for Saudi government to provide finance for overhauling the refineries, a project that is estimated to cost $2.2 billion. The agreements were reached during a meeting between President Tinubu and Saudi Crown Prince, Mohammed bin Salman, while the Saudi-Africa summit was holding in Riyadh.
Amidst Nigeria’s total debt profile of over N87 trillion, low crude oil production while the bulk of the revenue is going into debt servicing, the nation’s economy has been in the doldrums, with both federal and state governments falling into bankruptcy.
After years of running at a loss, Nigeria’s refineries in Warri, Port Harcourt and Kaduna were shut down about three years ago. The government later awarded the contract for the rehabilitation of the facilities for about $2.2 billion. Raising fund for the Nigerian National Petroleum Company Limited (NNPC), which recently borrowed $3 billion to tackle the free fall of the naira, has been a challenge as the country is facing investment apathy due to legacy issues that are now forcing oil companies to divest.
This is not the first time Nigeria is turning to Saudi Arabia. The immediate past President Muhammadu Buhari, in 2019, had directed the then Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu to attract investments from Saudi Arabia to Nigeria, leveraging the visit of a Minister of Energy Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al Falih to Abuja in 2018, and discussions with the King of Saudi Arabia, Salman bin Abdulaziz Al Saud, and the Crown Prince, Mohammed bin Salman bin Abdulaziz Al Saud earlier in 2015.
Then, top executives from key parastatals in the Ministry of Petroleum Resources, numbering about 30, were in Saudi Arabia to explore areas of cooperation and collaboration in the oil and gas industry between both countries. Their discussions were mainly on the downstream sector, refineries and petrochemicals, gas and mid-stream infrastructure, knowledge sharing, command and control as well as stabilisation of the global oil market. But there was nothing significant gained from the visit. Earlier this year, the total volume of trade between Nigeria and Saudi Arabia was a dismal $600 million.
Former President of the Chartered Institute of Bankers of Nigeria (CIBN) and professor of Economics at Babcock University, Segun Ajibola, said the government needed to follow through with investment.
“There is a need to also urgently address the few industry and environmental challenges to improve the ease of doing business rating. Security concerns, militancy, infrastructural deficits scare away investors in the oil and gas sector,” Ajibola said.
To him, there is also the need for faithful implementation of the provisions of the Petroleum Industry Act (PIA) in all ramifications. He noted that other things affecting foreign capital importation and foreign exchange remittances are already being addressed.
Ajibola explained that the essence of the Petroleum Industry Act is to attract new investors into the industry by removing the known bottlenecks. According to him, Nigeria remains a beautiful bride to investors across the globe, not only in the oil and gas sector but also in the agriculture, manufacturing, hospitality, tourism, education and health sectors.
“The Saudi investors led by Aramco, no doubt, see prospects in the oil and gas industry as governed by the provisions of the new PIA. Inflow of foreign direct investment is surely a good omen for Nigeria, especially into a critical sector as oil and gas,” he said.
The professor believes that the experience and expertise of the Saudi investors in oil and gas sector, especially in the management of refineries, would bring value additions to Nigeria.
He lamented the impact of importation of refined products on the nation’s fragile foreign exchange market, predicting that if the Saudi investors join hands with the Nigeria government to bring the currently moribund refineries back to life, combined with the efforts of the private refineries, Nigeria’s economy would become healthier.
“It is also hoped that the foray of the Saudi investors into Nigeria’s oil and gas business will help develop local capacity in terms of technology and human resources for the industry,” Ajibade said.
President of the Nigerian Economic Society (NES) and an energy Economist at the University of Ibadan, Prof. Adeola Adenikinju described the current move as encouraging, noting that Nigeria needs “all the help at getting the domestic refineries back to work.”
According to him, the development would save Nigeria from the huge foreign exchange being expended on importation of products and also boost government revenue.
“I also think if the Saudis were to invest in Nigeria’s petroleum sector, it would provide a huge boost to the sector and the economy, as well as increase foreign direct investment in the downstream sector, especially the refineries. This will eliminate our import dependence, provide opportunity for us to serve as a hub for refined products export, and generate employment and revenues for the economy.
“However, since there is no free lunch anywhere, we need to know the conditions attached to the support. Are we handling the refineries to them for management after the completion of the ongoing repairs? Is this a loan that has to be paid back at some time in the near future? What would be the implications of the support on subsidy policy, and so on? Hence, it will be nice to know the terms of the agreement,” Adenikinju said.
A policy analyst and immediate past Chairman, Society of Petroleum Engineers (SPE), Nigeria Council, Joe Nwakwue also stated that the details of the plans are critical, otherwise the move remains only on paper.
“The thing about these promises is that they remain promises, nice sweet words from a gracious host to a guest who needs help. Until concrete steps beyond diplomatese are taken to mature them to desired outcomes, the devil they say, are in the details,” he said.
The development, which is coming at a time Nigerian National Petroleum Company Limited (NNPCL) is reportedly planning to import 110, 000 barrels of crude oil per day from Venezuela or Saudi Arabia to operate the Kaduna Refinery due to come on stream next year, elicts lamentations over years of wastage of oil wealth in Nigeria.
The Chairman/CEO of International Energy Services (IES) Ltd, Dr. Diran Fawibe, said: “There is a fundamental basis and platform for strategic cooperation between the two countries having a close and robust relationship as fellow members of the Organisation of Petroleum Exporting Countries (OPEC).
“Apart from securing funds to expand our non-performing refineries and to establish petrochemical plants, Nigeria stands to learn a lot from Saudi Arabia in the deployment of technology to monitor our upstream assets with a view to eliminating current malpractices in the oil fields and to maximise efficiency in oil and gas production,” Fawibe noted.
Credit: Guardian Nigeria