Major setback awaits Nigerian economy as more foreign oil companies prepare to exit

Strong indications have emerged that Nigeria’s oil and gas industry may suffer a major setback this year as some International Oil Companies (IOCs) in the country seem poised to divest their stakes and exit the country for want of favourable sector reforms.

S & P Global Platts, a provider of energy and commodities information headquartered in London, in a recent report disclosed that the much-awaited turnaround in the nation’s oil sector in 2020 looked impossible, considering the potential of President Muhammadu Buhari-led economic model to frustrate efforts to raise oil production in the short term and even beyond.

Mr Buhari had last November taken a drastic measure to increase taxes on companies operating in the nation’s deepwater blocks, a gesture aimed at amassing greater revenue for the government, though the move has the far-reaching implication of putting off International Oil Companies (IOCs) from Nigeria and consequently impeding output growth.

Read also: Oil soars past $70 on the back of US-Iran tension: What it means for Nigeria’s 2020 budget

According to the current structure, foreign oil firms account for over 70% of investment in the oil and gas sector in Nigeria, itself Africa’s largest oil producer.

In the same month President Buhari hiked the taxes, California-based global oil giant, Chevron kick-started a divestment process that would sell off its 40% stake in two Nigerian shallow water leases, a move that put further strain on the fragile 116-year old relationship between the firm and the country.

Sometimes last April, Exxon Mobil Corp held talks with potential local investors in a bid to sell its investment in Nigerian oil and gas fields worth about $3 billion.

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