Nigeria’s recent decision to block Shell’s $2.4 billion sale of its onshore assets has raised concerns among investors regarding the country’s commitment to revitalizing its crucial oil sector, analysts have warned.
President Bola Tinubu has been actively trying to attract foreign investment as Nigeria grapples with a fiscal crisis, but the unexpected move by the upstream regulator to reject Shell’s deal with the Renaissance consortium—primarily composed of local firms—has sent a discouraging signal.
The regulator did not provide any reasons for its decision, and Shell has not yet commented. The company has had a longstanding presence in Nigeria, investing in its oil sector for over 50 years, making it one of the country’s largest foreign currency earners.
In contrast, a similar sale by Exxon Mobil to Seplat Energy was approved earlier this week, but only after a lengthy wait of more than two and a half years.
Clementine Wallop, director for sub-Saharan Africa at the political risk consultancy Horizon Engage, noted the irony in the situation. “On one hand, the government is promoting an open-for-business stance, while on the other, there are significant delays in regulatory approvals,” she explained. “These delays hinder the Tinubu administration’s investment initiatives and impact other sectors as well.”
Investment Downward Trend
As Nigeria continues to struggle with the economic fallout from the pandemic and its effect on oil demand, total foreign investment inflows fell to $3.9 billion last year, down from $5.3 billion in 2022, according to the National Bureau of Statistics. This decline marks a continuation of a downward trend that began five years ago when investments peaked at $24 billion.
The Shell assets in question are either underperforming or inactive, but could be revitalized with adequate investment. The Nigerian government has emphasized that increasing oil production—currently below 1.35 million barrels per day, against a target of 2 million—could help alleviate foreign currency shortages.
The lack of foreign currency and a steep decline in the value of the naira have prompted multinational corporations, including Procter & Gamble, GSK Plc, and Bayer AG, to either exit Nigeria or engage local third parties for distribution.
Telecommunications giant MTN and soap manufacturer PZ Cussons have also reported losses attributed to the ongoing currency crisis.
To attract the necessary investment, analysts suggest that faster regulatory approvals are essential. However, they also highlight other persistent issues, such as power shortages and corruption, which complicate the investment landscape.
“I believe Nigeria must do more to draw investments into the oil and gas sector, starting with expediting the regulatory approval process,” said Ayodele Oni, an energy lawyer and partner at Lagos-based Bloomfield Law Practice.
On a more positive note, some investors remain optimistic. Kola Karim, CEO of Shoreline Energy International, which operates in Nigeria, stated that the assets acquired by Seplat represent “low-hanging fruit” that could quickly be optimized for increased production.
He added that recent executive orders, including one allowing oil companies to spend up to $10 million without the need for a tender process, could significantly reduce project timelines. “For the first time in a long time, there’s a substantial alignment between the government and oil companies,” Karim noted.
