Nigeria is the second-largest oil producer in sub-Saharan Africa and one of the oil and gas markets on the continent with the greatest experience.
The participation of numerous international oil companies (IOC), such as TotalEnergies, Shell, Eni, Chevron, and ExxonMobil – who, according to Woomac, collectively have equity participation in over 110 oil mining licences and are responsible for 45 percent of the country’s oil production – as well as the leadership of the state-owned Nigerian National Petroleum Corporation, have been largely credited for the country’s energy achievements. These IOC also include TotalEnergies, Shell (NNPC).
The introduction of the African Continental Free Trade Agreement and local content-oriented regulation in Nigeria have spurred indigenous enterprises to step up as a result of IOC’s exit from important hydrocarbon assets in light of the energy revolution (AfCFTA).
Domestic Participation is Improved by Market-Driven Policies
When it comes to the adoption of local content policies intended to encourage the participation of local companies, Nigeria is a pioneer in the African oil and gas sector.
The Nigerian Oil and Gas Industry Content Development (Local Content Act), a comprehensive framework to encourage local participation in the sector, was developed by the government in 2010.
The Local Content Act, in particular, establishes minimum standards for the utilisation of local goods and services, encourages the transfer of technology and skills to the Nigerian labour force, ensures value addition and job creation, and encourages the awarding of oil and gas contracts and undertakings to local businesses.
In this regard, the legislation has been crucial in enhancing the role that local businesses play while also fostering fierce domestic competition in Nigeria.
Nigeria is committed to significantly increasing local content across the sector, and is currently debating a Bill for the amendment of the Act, which would change the Act to include changes to the minimum target levels for imported goods, as well as changes to the definition of Nigerian companies and capacity compliance.
The adoption of the Petroleum Industry Act (PIA) in 2021, which is a significant driver of Nigeria’s domestic market, has further bolstered that industry.
The legislation primarily focuses on revenue and natural resource management, but the PIA involves a total reorganisation of the oil and gas business, commercialising the NNPC, establishing two regulatory agencies, and assuring enhanced openness and accountability.
The Local Content Act is still essential in the nation and will continue to grow the local economy.
Making the Most of AfCFTA’s Opportunities
The AfCFTA’s adoption in January 2021 only served to increase local enterprises’ participation because a supportive environment had already been established to encourage it, opening up new possibilities for intra-African trade and commerce.
In order to create a single market for goods, people, and services, the AfCFTA specifically entails the removal of red tape, the simplification of customs procedures, and the lowering of tariff and non-tariff obstacles.
The AfCFTA is particularly significant for Nigeria since it has enhanced local employment prospects, regional supply networks, and capacity building for the region’s oil and gas sector.
Nigerian businesses can now take advantage of increased export potential, regional investment, and access to new supply chains for logistics and distribution.
Due to their expanded market penetration in the region, Nigerian businesses are now more competitive on the entire regional market.
Nigerian businesses take the initiative
Local businesses in Nigeria have greatly increased their engagement in the industry thanks to the PIA, the Local Content Act, and the opportunities made possible by the AfCFTA.
AOS Orwell, the largest indigenous oilfield services provider in Nigeria, Tecon Oil Services, which offers a wide range of services to E&P firms operating in Nigeria’s upstream sector, and Century Energy Services Limited, one of the largest providers of Operations & Maintenance services in west Africa, have all positioned themselves as key enablers of the expansion of the country’s oil and gas market.
On the upstream side, businesses like the recently reformed NNPC and its subsidiary, the Nigerian Petroleum Development Company;
Amni International Petroleum Development Company, active in a number of offshore basins throughout west Africa;
Emerald Energy Resources, an independent oil company with a goal to seek out and acquire profitable new reserves in Nigeria;
Frontier Oil Corporation, a wholly owned Nigerian E&P company established in 2001;
and South Atlantic Petroleum, a petroleum company with operations in the United States and the United Kingdom;
These businesses are helping Nigeria enter a new phase of domestic market expansion and expanding the reach of Nigerian businesses abroad.
The domestic market of Nigeria is poised to make a compelling case for investment and development in west Africa as a result of the country’s partnership with the African Energy Chamber (AEC) for the 2022 edition of the continent’s premier energy event, African Energy Week (AEW) 2022, which will be held in Cape Town from October 18–21 and have as its theme “Exploring and Investing in Africa’s Energy Future while Driving an Enabling Environment”.
Nigerian enterprises will steer conversation and decision-making surrounding Africa’s future energy by participating in panels, debates, and networking events.