Komolafe: Nigeria Gradually Reversing Investment Decline in Oil, Gas Industry

Komolafe: Nigeria Gradually Reversing Investment Decline in Oil, Gas Industry

·      AfDB says rising oil prices, increasing production to support Nigeria’s economy in 2024

·      Country missing as Africa is set to account for 11 of 20 fastest growing economies

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Mr. Gbenga Komolafe, disclosed at the weekend that Nigeria was gradually reversing the investment decline in the oil and gas upstream sector.

Speaking in Lagos after receiving The Sun Public Service Award 2023, during the newspaper’s 21st Anniversary Award Dinner, Komolafe said the country recorded capital expenditure (Capex) worth billions of dollars within the last two and a half years on the back of the implementation of the Petroleum Industry Act (PIA).

He revealed that the restoration of investors’ confidence and the creation of certainty and predictability in the sector had been robbing off on the industry, as active rigs had jumped from 11 in 2011 to 30 currently.

Komolafe reiterated that the introduction of the crude oil measurement regulation, which was the first ever in Nigeria’s over 70 decades of oil and gas production, would save the country billions of dollars.

The NUPRC chief executive was among over 30 Nigerians conferred with The Sun 2024 awards in different categories for their excellence and positive impact in their respective callings in the public and private sectors.

Speaking after receiving his award, accompanied by Head of Public Affairs and Communication, NUPRC, Mrs Olaide Shonola, and Regional Director, Lagos Office, NUPRC, Mr. Paul Osu, among others, Komolafe said the award would further encourage him and his team to be more dedicated to the service of the country.

Revealing that he had received over 40 different awards in the last one year, Komolafe noted that awards signified a reward mechanism in the society, stressing that when the resourceful ones are rewarded, it further inspires others to be resourceful and contribute to the task of nation-building.

He stated, “First, let me seize this opportunity to thank the management and staff of The Sun for honouring me with this award. Indeed, in the last one year, I’ve received over 40 awards. But this award will further encourage us to dedicate ourselves to the service of the Federal Republic of Nigeria.

“Like the chairman of the occasion mentioned in his speech, the task of nation-building is a collective effort. It is not for people in government alone. It is actually for all the citizenry. And this award speaks to the reward mechanism in our society.

“When the resourceful ones are rewarded, it further inspires others to be resourceful and contribute to the task of nation building.”

Komolafe dedicated the award to his wife and other members of the commission.

On the oil and gas industry and the mandate of the commission, the NUPRC head said since their resumption at the commission in the last two and a half years as pioneer staff and management, they had dedicated themselves to the service of the country.

He said the team had been discharging their duties silently and assiduously, resulting in the success stories being told.

Komolafe revealed that the country had recorded capital expenditure worth billions of dollars within the last two and a half years of the implementation of PIA, coupled with the enabling regulations being churned out and implemented by the commission.

From feedback received from the industry, Komolafe said the country now had about 30 rigs in its upstream oil and gas sector, against 11 active rigs in 2011, attributing the significant improvement to the restoration of investors’ confidence in the industry.

He stated, “That is huge success for us, and you know that rig count is a measure of vibrant activities in the oil industry. We have been able to attract confidence, certainty, predictability, into the Industry.

“If you check, we’ve attracted Capex going into billions of dollars into the Nigerian upstream. So, gradually, we are happy that we have success stories to tell just in about less than two and a half years, and while doing this with my dedicated team, we never knew that people were watching.

“So, what you have seen today is a message that the Nigerian society is watching and that the award will further serve to propel us to higher service in the service of the Federal Republic of Nigeria.”

The commission chief executive said NUPRC had rolled out over 17 regulations with the objective of giving meaning to the intent of the PIA. He said these regulations served as regulatory tools to ensure certainty and predictability in the activities of the industry as against pre-PIA regime.

He said, “The oil industry is now in an era of post-PIA regime where we proudly would say that, now, there is certainty and attraction of investors’ confidence.”

Responding to a question on the most important regulations, Komolafe mentioned the crude oil measurement regulation, which he described as a novel initiative, having come after 70 years of oil and gas production in Nigeria. He said the regulation would save Nigeria billions of dollars when the commission commenced effective implementation of the policy.

He explained, “But strictly to your question, which is, of all the regulations, which one is more close to my heart? Of course, all of them are dear to my heart, but I’m particularly very proud about the measurement regulation, which is a novel initiative since the advent of oil in Nigeria in 1956, but over seven decades of oil and gas production in Nigeria.

“So, I’m very passionate about the regulation in the sense that we feel it’s a regulation that will save Nigeria billions of dollars as we commence the effective implementation of this regulation.”

Meanwhile, African Development Bank (AfDB) said at the weekend that although the growth of the Nigerian economy will be generally slow in 2024 and 2025, it expected that the stable progress will be supported by the current rising oil prices and increasing production of the commodity in Nigeria.

In its February 2024 edition of “Africa’s Macroeconomic Performance and Outlook”,  the continental bank stated that the Nigerian economy could begin recovery in 2025, on the back of macroeconomic policy reforms initiated in 2023 by the Bola Tinubu administration.

The report is a biannual publication released in the first and third quarters of each year and complements the African Economic Outlook, AfDB ‘s annual flagship publication.

According to the bank, the Macroeconomic Performance Outlook report provides African policymakers, African and global investors, researchers, and other development partners with an up-to-date evidence-based assessment of Africa’s recent macroeconomic performance and short-to-medium term outlook amid dynamic global economic developments.

It stated that Africa’s economic growth fell to 3.2 per cent last year from 4.1 per cent in 2022, noting that despite the shocks buffeting the region, 15 African countries posted economic growth of more than five per cent last year.

Nigeria, West Africa’s largest economy, was set to grow 2.9 per cent in 2024, up 0.4 percentage points from last year, AfDB said, as a sharply devalued currency pushed up inflation, exacerbating a cost of living crisis.

The growth in certain sub-regions of Africa, AfDB said, was expected  to  offset  the  slowdowns  in  the  region’s  largest  economy, Nigeria,  and  in  debt-ridden  Ghana. 

AfDB said, “But both could recover strongly in 2025, with projected growth of 3.7 per cent and 4.5 per cent, respectively.  The  recovery  will  be  underpinned by macroeconomic policy reforms initiated  in  2023  through  rationalising  the  fuel  subsidy and addressing exchange rate misalignment in Nigeria.”

AfDB stated that average growth in  oil exporting  countries in Africa was projected to be stable over 2023–25, with a slight improvement  from  an  estimated  3.4  per cent  in  2023  to  3.6  per cent  in  2024  and  3.9  per cent  in  2025.

It stated, “Stable growth is projected, despite OPEC’s lower production targets for 2024 for two of Africa’s major oil exporters — Nigeria and Angola, the latter of which announced withdrawal of its membership from the bloc owing to disagreements on production cuts.

“Expected growth outcomes for the country group will be supported by high crude oil prices and high investment targeted at bringing new projects on stream that could raise hydrocarbon output

“Despite an  aggressive global push to curb investment in fossil fuels, growing energy needs to drive Africa’s development and transformation could require increased capital flows to Africa’s oil- producing countries.”

According to AfDB, Africa is projected to remain the fastest growing region in the world, after Asia, exceeding the global average of three per cent in 2023 and will account for 11 out of the 20 fastest growing economies in the world in 2024. However, Nigeria was not listed among the 11 nations to drive growth in 2024.

The report said, “We project that growth on the continent will rebound to 3.8 per cent in 2024. We expect this growth to be broad-based, although domestic supply bottlenecks such as shortfalls in electricity generation are still lingering.”

According to the bank, inflationary pressures in Africa have heightened and remain strongly entrenched, lagging improvements in the rest of the world, with average inflation remaining high at an estimated 17.8 per cent in 2023, the highest in more than a decade.

It stressed that with the global economy mired in uncertainty, fiscal positions on the African continent will remain vulnerable to global shocks.

AfDB stated, “The confluence of higher global interest rates, wider sovereign debt spreads, and exchange rate depreciations have increased debt servicing costs. By November 2023, 21 African countries were at high risk of debt distress or already in debt distress.

“Sovereign spreads have eased from their peak early in 2023 but borrowing costs are likely to remain elevated, despite planned rate cuts in Europe and the United States.

“We project that economic growth will regain moderate strength as long as the global economy remains resilient, disinflation continues, investment in infrastructure projects remains buoyant, and there is sustained progress on debt restructuring and fiscal consolidation.

“However, key downside risks remain to the outlook, such as persistent inflation. Rising geopolitical tensions—which could disrupt trade and investment flows—could push up food and commodity prices and delay the much-needed easing of monetary conditions worldwide.

“This would in turn jeopardise fiscal consolidation. Increased regional conflicts and political instability tend to increase defence spending, diverting resources away from development and social support.”

The report stated that tackling persistent inflation will need a mix of restraining monetary policy, coupled with fiscal consolidation and stable exchange rates. It explained that structural reforms and strategic industrial and agricultural policies remained the key to accelerate economic diversification and strengthen the export sector.

Speaking on the document, AfDB President, Dr Akinwunmi Adesina, said a lot more effort needed to be put into domestic resource mobilisation.

Adesina stated that the rising debt service costs for many countries, worsened by weakening of several local currencies requires that a reasonable balance be achieved between external and domestic borrowing

He stated that this was especially with greater focus on lending in local currencies to mitigate rising foreign exchange risks.

He said, “Countries need to do a better job of managing and deriving greater revenue from their enormous natural resources, through better governance, transparency, avoiding transfer pricing and ensuring that appropriate value is generated from royalties and taxes.”

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