Nigeria‘s decision to block Shell‘s $2.4 billion sale of its onshore properties has sent a negative signal to investors, analysts have warned. This move has undermined President Bola Tinubu‘s efforts to attract foreign investment, especially as the country grapples with a fiscal crisis.
The upstream regulator’s surprise decision to decline the sale to the Renaissance consortium, dominated by local companies, did not provide any reasons and Shell has yet to comment. Shell, one of the largest investors in Nigeria’s oil sector, has been operating in the country for over half a century and is crucial to Nigeria’s economy and foreign currency earnings.
In contrast, a similar deal by Exxon Mobil to sell its onshore assets to Seplat Energy was approved this week, although it took more than two and a half years to get the regulatory nod. Clementine Wallop, director for sub-Saharan Africa at Horizon Engage, noted that the long delays in regulatory approvals are hindering the government’s mission to attract outside investment.
Nigeria’s economy has struggled to recover from the pandemic’s impact on oil demand, with total foreign investment inflows dropping to $3.9 billion last year from $5.3 billion in 2022. The lack of foreign currency and the naira’s devaluation have forced multinational companies like Procter & Gamble, GSK Plc, and Bayer AG to either leave or outsource their operations in Nigeria.
Experts argue that faster regulatory approvals are essential to attract much-needed investment in the oil and gas sector. Ayodele Oni, an energy lawyer, emphasized the need to enhance the speed of regulatory approvals to draw in investments. However, some investors remain optimistic, citing recent executive orders that could streamline project timelines.
Kola Karim, CEO of Coastline Energy International, highlighted that the assets purchased by Seplat were low-hanging fruit that could quickly be turned around to boost production. He also praised recent executive orders, including one that raised the amount oil firms can spend without tendering to $10 million, as steps in the right direction.
