Nigeria Expected To See Ongoing Decline In Foreign Direct Investment Withdrawals-EIU

According to the latest Country Report on Nigeria by the Economist Intelligence Unit (EIU), indigenous oil companies acquiring assets from divesting international oil companies may struggle to match their investing capabilities. The EIU expressed concerns that these local companies would not possess the same financial power as the multinational corporations, which have historically been pivotal in Nigeria’s oil sector.

The report highlighted various challenges in Nigeria’s business environment, including corruption, cronyism, insecurity, and inadequate infrastructure. It anticipated a potential decrease in foreign direct investment in 2024, similar to the previous year’s trend.

Several foreign oil companies have already announced plans to sell their onshore oil businesses in Nigeria and relocate offshore. Shell Plc, for instance, disclosed an agreement to sell its Nigerian onshore subsidiary to Renaissance, a consortium of exploration and production companies.

Other major players like ExxonMobil, Equinor, and TotalEnergies have also shown interest in divesting their stakes in Nigeria’s onshore oilfields. The Minister of State Petroleum (Oil), Heineken Lokpobiri, viewed this divestment as beneficial, suggesting it would create opportunities for indigenous companies to enhance their capacity in onshore and shallow water operations.

However, some local stakeholders, including Imo State Governor Hope Uzodinma, criticized the foreign oil firms for their shift towards offshore operations. Despite Uzodinma’s concerns, the EIU report indicated that the exodus of multinational oil majors from onshore assets could lead to the indigenization of the sector over time.

Nevertheless, the report cautioned that while this trend could potentially increase foreign exchange accumulation, indigenous companies might struggle to match the investing power of outgoing multinationals. It predicted a gradual increase in Nigeria’s crude oil production but noted that it would still remain below the 2019 levels.

In conclusion, the EIU report underscores the complex dynamics shaping Nigeria’s oil industry, with implications for both foreign investors and indigenous companies. It suggests that while the divestment of multinational corporations may present opportunities for local players, overcoming financial disparities remains a significant challenge.

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