Challenges and Opportunities in Nigeria’s Oil Sector: Indigenous Companies Face Financial Hurdles Amidst Multinational Exodus

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An international business research firm, the Economist Intelligence Unit (EIU), has expressed concerns over the ability of indigenous oil companies to match the investing power of divesting international oil companies (IOCs). In its latest Country Report on Nigeria, the EIU noted that indigenous companies lack the same financial resources as the multinationals, which have historically been the primary drivers of the Nigerian oil industry.

The EIU warned of a potential net withdrawal of foreign direct investment (FDI) in 2024, citing challenges such as corruption, cronyism, insecurity, and infrastructure deficits. It highlighted a trend of multinationals reducing their presence in Nigeria, which had led to a net FDI withdrawal in the previous year and was expected to continue in 2024 due to losses incurred from currency depreciation.

Several foreign oil companies have already announced plans to sell their onshore oil assets and shift focus to offshore operations. Shell Plc, ExxonMobil, Equinor, and TotalEnergies are among those considering divesting their stakes in Nigeria’s onshore oilfields. The Minister of State for Petroleum (Oil), Heineken Lokpobiri, viewed this divestment as an opportunity for indigenous companies to develop capacity in onshore and shallow water operations.

Governor Hope Uzodinma of Imo State echoed this sentiment, seeing the exodus of foreign oil firms as a chance for indigenous companies to expand their participation in the sector. However, the EIU cautioned that while the indigenization of the sector could lead to positive outcomes in terms of foreign exchange accumulation, local companies might struggle to match the investing power of outgoing multinationals.

Despite these challenges, the EIU predicted an increase in Nigeria’s crude oil production from 1.23 million barrels per day (mbpd) in 2023 to 1.48 mbpd by 2028. However, this forecast still falls short of the 2019 production level by approximately 250,000 barrels per day.

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