Nigeria’s overreliance on oil increases economic risk, shrinking investments – Report

THE Nigerian economy is currently exposed to higher economic risks as
foreign investors’ interest in the country’s oil and gas is dropping, data from the National Bureau of Statistics (NBS), has shown.

The oil and gas sector remains the lifeblood of Nigeria’s economy. It has been the major supplier of dollars to the country’s foreign reserve, which serves as a buffer to Nigeria’s currency market.

The weak dollar supply to the currency market has been exploited by market speculators, who influence the naira-dollar exchange rate pricing at the expense of the Nigerian economy.

The second-quarter 2023 oil and gas data from the NBS revealed that the industry was sidelined by foreign investors in the same quarter for the first time on record, as the once lucrative sector attracted no capital inflow in the period.

Also, Nigeria recorded a total of $1.03 billion as capital importation in the second quarter of 2023, slightly lower than the $1.13 billion recorded in the previous quarter, which is also 32.9 per cent lower than the $1.54 billion recorded in the corresponding period of 2022.

It is also worth noting that the second-quarter 2023 figure is the lowest since the second quarter of 2021.

A further breakdown of the data from the NBS showed that most of the foreign inflows during the period came into the country as loans, accounting for 74.9 per cent of the total capital import.

Meanwhile, foreign direct investment (FDI), which was $86.03 million, accounted for 8.4 per cent, while foreign portfolio investment of $106.85 million accounted for 10.4 per cent of the total.

For some economic experts, this development is worrisome to the Nigerian economy, as the nation needs to attract more investments into the oil sector.

“We have the oil given to us by God freely, but we have failed to maximise it to the benefit of our populace. We need to set the economy on the path of growth for wealth creation and jobs for our people,” a development economist, Chuka Mbonu, told The ICIR.

Already, Nigeria is facing serious problems with some of its traditional funders looking for a cleaner energy source amid climate change concerns.

Similarly, an oil and gas sector analyst and director of governance and sustainability, Sahara Group, Ejiro Gray told The ICIR that the government needed to de-risk the sector to attract cleaner energy funds into Nigeria’s gas sector.

“We must de-risk the sector to attract sustainable investment into the sector. Investors have to be assured they will get their returns back without being exposed to political and security risks”.

Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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