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

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.

Ronald Adamolekun

Ronald Adamolekun is a creative writer with a mixed bag of experience in fields as diverse as data journalism, financial reporting and editing.
Ronald Adamolekun

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Ronald Adamolekun

Ronald Adamolekun is a creative writer with a mixed bag of experience in fields as diverse as data journalism, financial reporting and editing.

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