Nigeria remains one of Africa's most oil-rich countries, with the Organisation of Petroleum Exporting Countries estimating its total oil reserves at over 37 billion barrels.
Nigeria is Africa's second largest oil producer in 2022 and West Africa's largest consumer and producer of gas. In recent months, it has endured tumultuous production totals to regain its form. The country's daily oil production fell from 1.2 million barrels in February 2022 to less than one million in August of the same year, before rebounding again to 1.2 million barrels in January this year.
This resilience has been severely tested by recent events, both global and domestic. The Russian invasion of Ukraine has created chaos in global energy supplies, with Russia's daily oil exports of 2.8 million barrels disrupted by foreign sanctions and withdrawal of investment.
On the domestic front, Nigeria faced elections in February that could determine the future of the country's oil sector in this uncertain environment. As the administration of former president Muhammadu Buhari presides over years of inefficiencies and theft in the oil and gas sector, newly elected All Progressives Congress (APC) candidate Bola Tinubu has a rare opportunity to expand Nigerian oil and gas production in the vacuum left by Russia.
Buhari's relationship with energy
Buhari, the APC leader, was elected in May 2015. His government has struggled to capitalise on Nigeria's potential energy resources, both renewable energy and oil and gas. In 2021, he claimed that Nigeria had missed out on about $50 billion in potential foreign investment due, in part, to delays in passing its Petroleum Industry Bill, which sets out new administrative and organisational structures for the country's oil and gas sector.
According to a study published in Global Energy Law and Sustainability, this has led to international oil companies wanting "offshore development and corrupt governments seeking to exploit it". He said that because of this, many companies have tried to take advantage of the abundance of resources by lobbying for favourable terms when they seek to invest in Nigerian oil. Companies made promises and proposals that could benefit both themselves and Nigeria as a whole, but the reliance on foreign direct investment weakened the role of the state.
Ces défis ont été aggravés par le fait que la Nigerian National Petroleum Company ( NNPC ) a été confrontée à d’énormes quantités de pétrole volé pendant le mandat de Buhari. En septembre 2022, GlobalData a rapporté qu’en raison du vol de pétrole, le Nigéria avait perdu 470 000 barils de pétrole brut par jour, ce qui représente des pertes mensuelles d’environ 700 millions de dollars. Un porte-parole de la société Shell a déclaré que le vol de pétrole à l’échelle industrielle au Nigeria constituait une « menace existentielle » pour le plus grand exportateur de pétrole d’Afrique, et Buhari a ajouté que le problème du vol avait « énorme » un impact sur les finances de l’État. En conséquence, l’Angola a dépassé le Nigeria pour devenir le plus grand exportateur de pétrole d’Afrique en juillet 2022.
Bala Wunti, director of National Petroleum Investment Management Services, said: 'When you multiply seven million barrels by $100, that's $700 million lost per month and about 150,000 expected barrels are delayed; we are not producing because of safety issues.
It was reported that the criminals had taken workers to work in unregistered refineries. Wunti confirmed that a routine investigation revealed that the workers had been given fake letters of employment, while Azubuike Ahubelem, a leader of the Petroleum and Natural Gas Senior Staff Association of Nigeria, accused the government of continued theft. He said: "This is [happening] because there is no political will, and it shows us that there is no government that is looking after the welfare of the people.
Electoral uncertainty
Nigeria's oil and gas struggles culminated in the transition of the NNPC from a public to a private organisation in July 2022, to improve its access to international markets.
This is not the only source of tumult and uncertainty in recent months. In the February elections, incumbent President Buhari did not run for the presidency, opening the door for Tinubu, former Vice President Atiku Abubakar and third party candidate Peter Obi to run for the presidency.
Prior to the elections, Nigeria faced a number of problems that created havoc for its citizens. Nigerians were forced to wait for hours in queues for cash and fuel due to a severe cash shortage, petrol shortages in petrol-affected industries across the country and salaries had not been paid due to the lack of cash. In February, Nigeria's Independent National Electoral Commission warned that these shortages could disrupt payments to logistical staff, making it difficult to conduct the elections as planned.
Many of these fears were realized as the vote was "marred by violence and rigging", according to NPR . Incidents of violence and protests were reported at polling stations across the country, and the announcement of results was delayed for four days as election officials struggled to verify and count the votes.
Tinubu's victory left millions of Nigerians at a crossroads. The APC candidate got a total of 8,794,726 votes, surpassing Abubakar's 6,984,520 votes, but low turnout tainted the results. Some 93.46 million Nigerian citizens were eligible to vote, but fewer than 25 million valid votes were cast, leading many of Tinubu's opponents to insist that he lacks the mandate to govern. Five political parties are contesting the election results, led by Abubakar himself. Nigeria could be set for a long process after these elections in which the government will exist in a state of limbo, before any decision can be taken.
Seeking certainty in Nigeria after the elections
This uncertainty will do little for Nigeria, which was already facing major questions about its energy future. For example, JD Supra said that from February, upstream, midstream and downstream operations would be separated into separate licence categories, meaning that companies with a licence for a single project covering several parts of the supply chain would have to apply for new, more specific, licences.
He added that a new licensing round, covering seven deepwater blocks, will take place in 2023, Nigeria's first offshore tender in 15 years. In addition, the Ajaokuta-Kaduna-Kano pipeline and Seplat's Assa North-Ohaji South Gas project will come on stream in the first half of this year, suggesting that Nigeria is keen to pursue oil and gas investments.
However, many global economies are reluctant to invest in fossil fuels on a large scale, prompting Nigeria to seek $10 billion worth of international investment to switch to solar expansion and dual gas-fired power generation. Unfortunately for Nigeria, a spokesperson for Auerbach Grayson told Reuters that recent tumultuous events have discouraged foreign investment, which could undermine much of Nigeria's clean energy ambitions. The Nigerian Exchange Group's data report showed that foreign investors accounted for 57.7% of Nigeria's equity trading in 2014, before a sharp drop to 22.9% by 2021.
Reuters reported that investors had strong preferences for who would win, despite the fact that all three candidates support similar policy variations. A portfolio manager at Amund, Joe Delvaux, told Reuters that if Tinubu won the elections, Nigeria would see a smoother transition of power and changes in the energy sector.
While the outcome of the elections is still hotly debated, Tinubu is currently in power and will face a number of challenges in the country's oil and gas sector. European countries are eager to buy oil from sources other than Russia, offering Nigeria the opportunity to increase its oil exports, but much of its infrastructure is still lacking; the country's natural gas facility on Bonny Island, as of August 2022, is operating at 60% capacity, a metaphor for the country's inefficient oil and gas sector in the midst of considerable opportunity.
The next government, and the one that ultimately assumes power in the long term, will have to manage the national debt, provide services to citizens and invest in the country's energy industry, whatever form that takes.