By Adeyinka Adeniran
The President, Nigerian Economic Society (NES), Prof. Adeola Adenikinju has warned that low investments in the nation’s energy sector portends great danger for the economy of the country in the future.
Adenikinju, a professor of Petroleum Economics at the University of Ibadan noted that divestment by international oil companies (IOCs) is taking a toll on the economy of the country.
The former Director of the Centre for Petroleum, Energy Economics and Law (CPEEL), UI, who is also the immediate past Head of Department of Economics at the premier university, identified vandalism, oil theft and other challenges as hampering the sector’s contribution to gross domestic product (GDP).
Adenikinju, who is also a member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) lamented that Nigeria is losing a lot of money, particularly saying that the oil sector has been contributing negatively to Nigerian economic growth in the last few quarters.
The professor said: ‘’You have to break the issue in the oil sector down. At the off-stream where you do production, until recently, there has been a lot of volatility. There was a time we were doing one million barrels per day because of security, pipeline vandalism, oil theft and so many challenges that were going on in the sector.
‘’Nigeria was losing a lot of money. In fact, from the last four quarters, the oil sector has been contributing negatively to Nigerian economic growth.
‘’The oil GDP has been negative and as I have mentioned in some other meetings, we should not normalize that. We shouldn’t accept that. That’s not the way to diversify the oil sector; it is not by losing money. It is caused by the oil sector growing. So, we need to address that.
‘’There is also something like divestment in the sector, the multinational oil companies are not investing much again, either because of the challenges of some of them trying to move away from hydrocarbons to other energies that are greener or because of some of the security challenges that they have and maybe because of the fiscal system that we have.
“So, we don’t have enough investment. Investors are not coming into the sector and in fact, we may not have the full effects until later, because when you do investment, it takes years before that translates into production.
‘’So, the low investment that we are having now, we may not start to see the impact until much later when the existing production fields start declining and we are not able to replace and expand what we are doing.
‘’We have those kind of challenges and the unfortunate thing is that when we shut in or shut down or not producing enough oil, that also affects gas, because most of the gas we produce in Nigeria is associated gas, in fact, for some time, NLNG was not able to meet the quota of gas because the oil sector is not producing the required quantity and that was affecting the amount of gas that was available for the NLNG’’.
