Nigeria needs to overhaul its oil and gas sector to make it more transparent and open to fuel-pricing competition if it wants to attract investments from U.S. oil firms, a Nigeria-based official at the U.S. Department of Commerce told Bloomberg in an interview.
According to Brent Omdahl, who is commercial counselor at the U.S. Department of Commerce:
“Our investors are willing to compete on fair terms for new investments if there’s a transparent process to try to win new oil opportunities. What is difficult or a disincentive to investors is when deals are done and then the contracts are not honored.”
Nigeria should also consider removing the price controls over gasoline and other fuels in order to open the market to competition, Omdahl told Bloomberg, adding that the current fuel price controls “perpetuate a system where only certain people benefit.”
As a whole, Nigeria needs to think strategically for the long term about how it could become a more attractive destination for foreign, including U.S., oil companies, according to Omdahl.
The International Monetary Fund (IMF) noted in April that Nigeria could help reduce the poverty gap and increase fiscal resources if it were to phase out the implicit fuel subsidies “while strengthening social safety nets to mitigate the impact on the most vulnerable.”
Nigeria is dusting off an ambitious plan to double its oil production by 2025, aiming to pump as much as 4 million bpd in six years’ time, but analysts think that the goal may be too ambitious for the country to achieve.
According to analysts who talked to Bloomberg earlier this month, Nigeria’s President Muhammadu Buhari—who was re-elected this February—now has a more friendly Parliament and could introduce a new petroleum bill to reform the oil sector. Possible reforms could reduce the Nigerian state oil firm’s interest in joint ventures with foreign companies, address the causes of violence in the oil-rich Niger Delta, and introduce royalties and taxes on deepwater drilling, which is opposed by Big Oil, including Chevron and Exxon. However, some analysts question the resolve of the president and Parliament to pass reforms quickly.