Nigeria top FDI destination but crippled by oil theft


Accroding to the United Nation’s Conference on Trade and Development’s (UNCTAD) 2013 World Investment Report, Nigeria was one of six African countries that received FDI inflows of over 3 billion dollars in 2012.

The country boast a net inflow of seven billion dollars, but the continued oil theft at the Niger Delta and reported violence by Boko Haram has continued to challenge the country.

“If you look at the composition of Nigeria’s FDI in 2012, you saw a massive increase in portfolio flows, which are by nature volatile. Long term investment, particularly in the oil and gas sector, is an issue in Nigeria. There are a number of developments that have happened, the likes of ConocoPhillips, Shell, Total divesting from the country,” Rand Merchant Bank country risk analyst Ronak Gopaldas told CNBC Africa on Wednesday.


“There’s still a lot of uncertainty around the petroleum industry bill. You’ve got oil theft in the delta rising, so from that perspective there are a number of challenges in FDI and that’s particularly important if you overlay that with changing trends in the industry.”

Shale gas discoveries in the United States could become a major blow to Nigeria’s oil export sector as the Western nation becomes more self-sufficient.

Adding to the threat is the oil and gas boom in East Africa, which could prompt the region to taking the same direction as the US and become its own oil producer and supplier.

A large number of skilled and well-educated Nigerians that studied and lived overseas are however returning to their country and channelling their skills towards improvements, especially in government and key economic ministries.

An economic heavyweight such as Nigeria Central Bank governor Sanusi Lamido Sanusi has been lauded for his monetary policy conduct and navigation of Nigeria through the banking crisis in 2009.

“If you look at Governor Sanusi’s approach, he’s been hawkish and his priority has been exchange rate stability and inflation. Regardless of who the next governor is, that’s not going to change. Whether his successor is going to have the ability to be as bold, decisive ad revolutionary in the sector remains to be seen but either way I don’t envision any major policy shifts,” Gopaldas explained.

The delay of the Petroleum Industry Bill will nevertheless continue to set the country back if not enforced and oil theft perpetrators not sanctioned for their crimes.

According to Gopaldas, the estimates for oil theft in the Delta range from 150,000 barrels per day to as much as 400,000 barrels per day.

“There’s clearly not economic calm and that’s reflected in the numbers. Given the current situation, that might translate into budget stresses. It’s a major problem and it’s not merely opportunistic, it’s sophisticated, it’s organised and it’s something that the government will need to address to prevent economic problems,” he said.