An analyst at a research and consulting firm has warned the Nigerian oil sector faces decline without reform
Young Okunna, upstream analyst for sub-Saharan Africa at GlobalData, said that despite having more than 37bn barrels of proven reserves, oil production in the West African nation was doomed to falter due to a toxic mixture of underinvestment, corruption and security issues.
Oil theft and vandalism are estimated to have caused losses of between 100,000 and 400,000 barrels per day (bpd), while more than 335 new discoveries across the country remain undeveloped.
According to Okunna, the only way to avoid this inevitable decline is for the new president, Muhammadu Buhari, to take concerted action to tackle domestic problems in order to restore confidence and attract investment.
“Buhari brings a reputation as a heavy-handed president able to potentially neutralize the Boko Haram threat, which is concentrated in the poorer northeast of the country,” Okunna explained. “While the oil sector is concentrated in the south, the Islamist group has in the past named refineries and oil infrastructure as targets.
“Nigeria’s new president is also a fierce opponent of corruption, having recently dissolved national oil company NNPC’s board following an estimated US$20bn scandal of inappropriately managed oil revenues.”
Continuing, Okunna concluded that “as companies look to redeploy capital after having pulled back when oil prices collapsed, Buhari’s government must reform the sector and also engage with community leaders to reduce sabotage and communal disturbances, in order to attract investment that will reverse the forecast production decline.”
