Dissecting Nigeria’s investment interest with Saudi Arabia, Qatar

Nigeria’s shift of attention to the Middle East and other regions for oil and gas investment is coming against the backdrop of the continuous decline of investment inflow into the country. With discussions already held with Saudi Arabia and Qatar, KINGSLEY JEREMIAH writes on possible obstacles and leeway
There are indications that the Federal Government will in the coming weeks take a strategic step to pursue the already established investment discussions with Saudi Arabia and Qatar. The discussion, which was affected by the last general elections and cabinet changes, is expected to receive the attention of the new Petroleum Ministers, especially the Minister of State, Timipre Sylva.

Discussions held earlier this year with top government officials of the two Middle East countries and Nigeria gave rise to optimism that Nigeria’s petroleum downstream sub-sector, especially refineries, pipelines and others may witness a major overhaul.

Minister of Energy Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al Falih and the former Minister of State for Petroleum Resources, Ibe Kachikwu had led delegations to Nigeria and Saudi Arabia, while Buhari at a meeting with the visiting Qatari Emir, Sheikh Tamim bin Hamad Al-Thani, discussed investment in Nigeria’s oil and gas sector.

While the discussions have been affected by political changes in Nigeria, Nigeria’s Organization of the Petroleum Exporting Countries (OPEC) Governor, Dr. Omar Farouk Ibrahim, who was strategic to the investment relationship between the two countries and Nigeria told The Guardian that the government of Saudi Arabia has approved a proposed Memorandum of Understanding with Nigeria.

Disclosing that details of the MoU include, investment in downstream infrastructure, especially pipeline, gas infrastructure, refineries, control system and others, Ibrahim noted that Sylva would be briefed to continue with the deal, especially signing the MoU.

Affected by corruption, lack of accountability, transparency and other pertinent issues, particularly the failure to pass the Petroleum Industry Bill, the nation’s oil sector is currently starved of international investment.

The sector, which is equally affected by declining oil prices remains Nigeria biggest source of income, accounting for approximately 56 per cent of state revenue and at least 85 per cent of export revenue.

As efforts are being made to drive investment into the sector, the concern for most experts is on the minimal attention the country has paid to the move by the western world to shift away from conventional fuel/hydrocarbon to alternatives – green fuel, solar, electric and to break OPEC’s hold on the global oil market.

Besides, they worry about the traditional challenges, which have deterred investors from the country, stressing that the move to Arab countries could be affected by the same prevailing challenges.Indeed, unlike Nigeria, the Arabs have an understanding that their oil wealth won’t sustain for as long as they would have wished, and on account of this are willing to offer better terms to maximize the benefits of their resources.

Just like the current challenges being witnessed in Nigeria’s deal with P & ID, Nigeria is notorious for contractual disrespect, coupled with insecurity and dearth of good policies to buoy investment.While gulf countries have extensive track record of significant investment in African countries, having invested over $30 billion in the continent over the last decade, including in Nigeria, Kenya, Mali, Tanzania amongst others, a professor of law with expertise in petroleum, energy and environmental law, Damilola Olawuyi saw the renewed interest in Nigeria as a positive development that could help catalyse sustained investment flow and development, especially in the oil, gas, solid minerals, education, agriculture and infrastructure sectors.

Olawuyi, who is familiar with Qatar’s discussion with Nigeria, noted that being the world’s largest exporter of Liquified Natural Gas (LNG) and the richest country in the world in terms of per capita income, Qatar remained clearly a significant and an attractive partner for Nigeria.

“Qatar has the experience, record of success and financial wherewithal to unlock the economic potential of these key sectors of the Nigerian economy. It is, however, essential for the Nigerian government to take immediate and active steps to establish Nigeria as a reliable, safe and friendly investment location, just like Qatar is,” he said.

Olawuyi, however, expressed worry over Nigeria’s perennial challenges of uncertain and overlapping regulatory and fiscal frameworks, as well as insecurity concerns in many parts of the country, which have been accentuating investment risks in the country.“We should not expect investors to overlook these risks, rather efforts should be intensified to reinstate investor confidence by tacking the challenges head-on.

“Prudent investors worldwide look for three things when deciding whether to invest in a country: investment opportunities; availability of clear and coherent regulatory and fiscal frameworks that advance the ease of doing business, as well as protect investments; and the investment climate of a country, in terms of security, infrastructure and institutional quality.

“Decline of investment inflow into Nigeria is certainly not due to lack of investment opportunities. With buoyant oil and gas, education, agriculture and infrastructure sectors, Nigeria has a lot to offer to the world,” Olawuyi, who equally heads the Institute for Oil, Gas, Energy, Environment and Suitability (OGEES) said.

According to him, the current regulatory and fiscal frameworks in Nigerian oil and gas sector require significant reform to achieve greater coherence, transparency and accountability, especially passing industry bills such as PIB and the NOSDRA Amendment Bill.Olawuyi said: “Lack of progress on these reform initiatives mean that we continue to operate under archaic and overlapping regulatory frameworks that have been around since the 1960s. This not only creates uncertainty for investors, it stifles progress on key issues of environmental risk management, as well as transparency and accountability.”

Chairman/CEO of International Energy Services (IES) Ltd, Dr. Diran Fawibe, equally expressed confidence that the emerging collaboration remains a strategic step, which should be should be supported. “There is a fundamental basis and platform for strategic cooperation between the two countries having a close and robust relationship as fellow members of OPEC. There is also a common understanding, which dates back many years when President Buhari was a young army colonel serving as petroleum minister with a lot of admiration and respect for him by Saudi Arabia’s Oil Minister, Sheik Ahmed Zaki Yamani.

“Apart from securing funds to expand our non-performing refineries and to establish petrochemical plants, Nigeria stands to learn a lot from Saudi Arabia in the deployment of technology to monitor our upstream assets with a view to eliminating current malpractices in the oil fields and to maximise efficiency in oil and gas production,” Fawibe noted.With Aramco being a success story as a national oil company, Fawibe noted that the NNPC should imbibe major operational principles, culture and philosophy that form the bedrock of Aramco’s success of the oil firm.

The Director, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Prof. Adeola Adenikinju, on his part, said the moves make reasonable economic sense.“I also think if the Saudis were to invest in Nigeria’s petroleum sector, it would provide a huge boost to the sector and the economy, as well as increase Foreign Direct Investment (FDI) in the downstream sector, especially the refineries. This will eliminate our import dependence, provide an opportunity for us to serve as a hub for refined products exports, and generate employment and revenues for the economy,” Adenikinju said.

He, however, warned that for the expected benefits to pour in, the environment, legal and commercial issues among others must be right.In his contribution, Chief Executive Officer, Mudiame International Limited and Mudiame Welding Institute Limited, Sunny Eromosele, is not convinced with the move because of the uncertainty in the nation’s oil sector.

According to him, even though the country needs knowledge transfer from Saudi Arabia, the trip could well be seen in the light of a mere jamboree without necessary frameworks in place in the country, especially the failure to sign the Petroleum Industry Bill (PIB). He added that since the President was proactive enough to send a delegation to the Arab country, he should muster the courage to endorse the PIB to law.

Eromosele said: “The bills should be signed into law. Nigeria needs a favourable and sustainable investment environment, and this is one of the foundational challenges. Without this, the visit could end up being a waste of resources, or just another tour.”For PricewaterhouseCoopers’s Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, the partnership has the capacity to boost the country’s ability to harness her oil and gas industry potentials.