Will Nigerian oil companies outperform fleeing oil multinationals?
Nigeria's oil sector without IOCs. Source: Stears Business

It was Wole Soyinka who said, “I wish we had never smelled the fumes of petroleum”.

It depends on who you ask, but some people say oil has been more of a curse than a blessing to Nigeria. Over 60 after oil was discovered, this debate is more relevant than ever due to low oil production volumes. Now, the government is scrambling to find non-oil revenue. But, if we hadn’t discovered oil, maybe we would have put more effort into non-oil income from day one.

But, we had oil.

Shell-BP discovered the black gold in Nigeria in 1956 and was its sole concessionaire. So, Shell had a front-row seat from when the oil was a blessing right down to when it became a curse. Many would argue that Shell has been a significant participant in this shift from blessing to curse.
 

Some takeaways:

 

  • International Oil Companies (IOCs) like Shell, Exxon Mobil and Chevron have announced their divestments from Nigeria’s onshore oil assets due to sabotage, theft and pressure to diversify to cleaner sources of energy.

  • Their exit has created an opportunity for Nigerian oil companies to expand their asset and revenue bases as well as gain more control of Nigeria’s oil sector.

  • But can Nigerian oil companies succeed where IOCs have failed and fled? While the IOCs have certain advantages over the Nigerian companies such as access to resources, Nigerian oil companies will need to put in place the right corporate governance structures to operate efficiently.

 

Last year, Shell announced that it was leaving the Nigerian onshore market due to challenges in the Niger Delta and its desire to diversify to cleaner energy sources. Despite Shell’s reputation, the announcement did not spark excitement. Rather, it raised existential questions about Nigeria's future, which has always been described as an oil-based economy. To make matters worse, it’s not just Shell that’s leaving. Chevron and Exxon Mobil have also announced plans to exit.

But where does this leave Nigeria?

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Noelle Okwedy

Noelle Okwedy

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