Nigeria’s vast oil reserves, estimated at 37 billion barrels, the largest in sub-Saharan Africa, should be a magnet for petrodollar investors in the oil and gas sector.

However, a web of bureaucracy, with up to 20 federal agencies involved in the approval process, is stifling operators and pushing investment to other smaller oil-producing countries.

Experts surveyed by BusinessDay said the overlapping responsibilities and conflicts between regulatory agencies are hindering fresh investments into Nigeria’s oil and gas sector, the lifeblood of Africa’s biggest economy, where investments have been too few and far between.

“Rather than an efficient and investor-friendly atmosphere, regulatory disarray prevents Nigeria from receiving much-needed economic advantages by discouraging new investments and impeding the expansion of ongoing initiatives,” a foreign investor exposed to the African market said.

“The really important thing here isn’t just the number of ministries but the humans in charge of them,” the investor said.

BusinessDay’s findings showed investors in Nigeria’s oil and gas sector have business engagements with at least 20 government agencies that all regulate operations, environments, contracts and procurement-related matters.

The agencies include the Federal Ministry of Petroleum Resources, Nigerian National Petroleum Company Limited, Nigerian Upstream Petroleum Regulatory Commission, Nigerian Content Development and Monitoring Board, Federal Inland Revenue Service, Nigeria Immigration Service, Niger Delta Development Commission, and Hydrocarbon Pollution Restoration Project (HYPREP), a specialised unit under Ministry of environment for starters.

Firms in the upstream sector also have to contend with other agencies such as the Nigerian Petroleum Exchange (NipeX), which provides an electronic contracting platform for NNPC Ltd and its operating partners in the Joint Venture and Production Sharing Contract arrangement, Nigeria Customs Service, National Maritime Administration and Safety Agency, National Oil Spill Detection and Response Agency, NNPC Upstream Investment Management Service and Nigerian Ports Authority.

Other agencies include the Bureau of Public Enterprise, Nigerian Midstream and Downstream Petroleum Regulatory Authority, Nigerian Nuclear Regulatory Authority, and commissioners of energy and environment in host states.

The Nigerian Police Force also provides permits for prospective firms aiming to set up retail petrol filling stations across the country.

Dapo Akinosun, senior partner at SimmonsCooper Partners said bureaucracy leads to rampant bribery and corruption with officials sometimes exploiting the bureaucratic complexity for personal gain thereby eroding trust and increasing operational risks.

“The prolonged processes for obtaining necessary licences and approvals can significantly delay projects, inflate costs, and deter potential investments,” Akinosun said.

“The lack of predictable timelines for regulatory approvals creates uncertainty, complicates project planning, and can discourage long-term investments,” Akinosun added.

Angola, Namibia only have two hurdles to scale

In contrast, smaller African countries like Angola, Mozambique and Namibia are attracting growing interest from oil and gas investors.

For instance, current trends in deep-water discoveries give investors good reason to be enthusiastic about Angola’s prospects.

The country has the Ministry of Mineral Resources, Oil and Gas (MIREMPET) and the National Oil, Gas and Biofuels Agency (ANPG) as regulators in the country’s oil and gas sector.

Angola’s Petroleum Activities Law states that all petroleum operations can only be conducted under specific licences issued by the Ministry of Mineral Resources, Oil and Gas (MIREMPET), or by an oil concession awarded by the Angolan government.

ANPG, created in 2019, is the body in charge of supervision, regulation and promotion of activities in Angola’s oil and gas sector. ANPG’s creation ended state-owned company Sonangol’s multiple roles as regulator, concessionaire and operator in the country’s oil sector.

Free of its regulatory function, Sonangol’s activities focus on research, production, and related petrochemical activities, as well as exploring other sectors such as renewables and hydrogen.

Besides Angola, Mozambique has the Ministry of Natural Resources (MIREME) and the National Petroleum Institute (NPI) as regulators in the country’s oil and gas sector.

MIREME is responsible for directing and executing the governmental natural resource policies and for the supervision of the NPI. The NPI is the regulatory authority responsible for administering and promoting Petroleum Operations.

In Namibia, the country’s Ministry of Mines and Energy’s Directorate of Petroleum Affairs regulates the upstream in addition to issuing petroleum licences and making policy.

A senior oil executive who pleaded anonymity said most of the agencies in Nigeria’s oil and gas sector are personality-driven rather than having institutional empowerment.

“The problem with Nigeria is the rent-sharing and rent-seeking mentality when it comes to the oil and gas sector because most of the agencies know there is money in the sector and they want to be partakers,” he said.

To change the narrative in Nigeria, Akinosun said the role of executive orders in streamlining bureaucracy within Nigeria’s oil and gas industry cannot be overstated.

“These directives have the potential to significantly enhance efficiency, promote transparency, and foster investment by simplifying regulatory processes and enforcing accountability,” Akinosun said.

On 28 February 2024, President Bola Tinubu signed three Executive Orders aimed at improving the investment climate and positioning Nigeria as the preferred investment destination for the petroleum sector in Africa.

BusinessDay’s findings showed one of the executive orders legally mandates that the contracting cycle be compressed to a maximum of six months.

This alignment with global industry standards significantly reduces delays that historically took up to two years or more, thus improving Nigeria’s competitiveness.

The Executive Order also mandates NNPC, NUIMS, and NCDMB to implement a single-level approval process for requalification, technical, commercial, and final stages, and ensures that approval is issued within 15 days.

This is expected to eliminate redundant multi-stage approvals and ensure that regulatory approvals are obtained more efficiently, fostering timely project execution, and reducing compliance costs.

“While some executive orders have set timelines, additional orders could enforce strict penalties for regulatory bodies that fail to meet these deadlines. This would ensure that the stipulated times are not merely guidelines but are adhered to strictly, thereby reducing delays,” Akinosun said. (BusinessDay)

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