Nigeria’s oil sector is grappling with a severe crisis as the number of operational rigs has plummeted to a six-month low, highlighting the ongoing challenges of chronic underinvestment. According to the latest data from the Organization of Petroleum Exporting Countries (OPEC), Nigeria’s oil rig count fluctuated significantly from January to June 2024. The count began at 15 rigs in January, rose to 16 in February, and peaked at 19 in March and April. However, it declined again to 16 in May and 15 in June.
NJ Ayuk, executive chairperson of the African Energy Chamber, noted that Nigeria, once a prime destination for major oil and gas investors, has lost its appeal. Investors are now more interested in emerging opportunities in Namibia, Ivory Coast, Angola, and the Republic of Congo. This shift is alarming for Nigeria, which relies heavily on oil for more than two-thirds of its revenue.
Foreign capital investments in Nigeria’s oil industry have drastically decreased, plummeting from $720 million in 2016 to just $3.64 million in 2023, as reported by the National Bureau of Statistics (NBS). In the first quarter of 2024, the petroleum sector received no capital importation out of the $3.38 billion total capital importation into Nigeria.
Professor Wumi Iledare, an energy economics expert, explained that the sharp decline in foreign investment is expected because investors are not convinced that the Petroleum Industry Act (PIA) has effectively changed Nigeria’s business environment. He criticized the previous administration for its poor implementation of the PIA and noted that the current government has not addressed these issues.
The situation is further exacerbated by the exit of major oil companies like Shell, ExxonMobil, Eni, and TotalEnergies. These companies have left due to large-scale theft, vandalism, and decades of underinvestment in infrastructure. In April 2023, Nigeria’s oil production fell below one million barrels per day, significantly lower than its OPEC quota. By June, production had slightly improved to 1.25 million barrels per day.
Austin Avuru, executive chairman of AA Holdings, stated that Nigeria needs $25 billion annually to stabilize its oil production at two million barrels per day. However, local operators are struggling to extract value from divested fields, which once accounted for more than two-thirds of Nigeria’s oil production.
Despite these challenges, there is hope for Nigeria’s oil sector. The government is urged to revisit and correct the implementation of the PIA to attract more foreign investments. By addressing the underlying issues and creating a more favorable business environment, Nigeria can regain its position as a leading oil producer in Africa.
