KEY POINTS
- Experts argue that the divestment of oil and gas assets in Nigeria does not need to be complex or protracted, as some industry players suggest.
- Simplifying the process could boost Nigeria’s economy by attracting more investments and facilitating a smoother transition to renewable energy.
- Clear regulatory frameworks and collaboration between government, investors, and industry operators are key to making asset divestment more efficient.
The sale of oil and gas assets in Nigeria, which has been regarded as a challenging and lengthy process, can be made easier to promote economic growth and attract more investments, industry stakeholders have said.
As the world turns to renewable sources of energy, the oil firms are seeking to divest some of their assets in Nigeria but the process has been slowed down by bureaucratic procedures and lengthy discussions.
Nonetheless, the experts have opined that the process of divestment can be made easier and effective if the right frameworks and the stakeholders come together.
If Nigeria were to eliminate unhelpful bureaucracy and increase the level of transparency, the country could become more attractive to investors despite the transformation of the energy sector.
The global pressure for asset sales and energy shift
With the energy majors around the world shifting their focus towards cleaner sources of energy, many are now in the process of exiting the oil and gas sector, especially in Nigeria where the sector has been the mainstay of the economy.
This has been due to the need to cut down on carbon footprint and meet climate change goals hence several IOCs have been looking forward to divesting in the country.
On the one hand, this has created opportunities for local and regional firms to purchase strategic assets, on the other hand, the divestment process has been lengthy because of regulatory constraints, ownership issues and environmental standards. But the gains for Nigeria’s economy are enormous if the process can be made easy and fast.
Business Day has reported that most of these delays are preventable if Nigeria would adopt a more efficient process of divestment.
Professional stress that one of the major factors for declining in transaction times is enhancement of the regulatory climate or providing more transparency in the tax and legal requirements to affected investors.
Efficient divestment depends on regulatory reforms.
One of the consistent issues which have made the divestment process difficult is the issue of multiple regulators in the Nigerian oil and gas industry.
Under existing laws and regulations, there are numerous issues that a firm must consider to exit from assets depends on the area, kind and character of divestment. This has most often produced long-drawn out bargaining and severe legal proceedings that have made potential investors shy away.
According to the experts, Nigeria could simplify the process of asset divestment by making changes to the country’s regulatory system.
That would make it easier for oil companies to complete asset sales without prolonged bureaucratic runaround of approvals, clear guidelines on who is actually going to own what after transfer, and clear understanding of environment compliance as other measures.
Also, enhanced coordination between the government and its related departments, investors, and operators of the industry would enhance the efficiency of transactions and make the environment more suitable for the oil and gas deals in the country.
Faster divestment and its economic benefits
Faster disinvestment in Nigeria’s oil and gas sector could open up a world of economic opportunities. If the country made it easier for companies to sell off assets, more investors could be attracted to the country, both local and international investors who are interested in investing in new opportunities.
This could assist increase the governmental income, provide work opportunity, and promote the development of branched industries.
In addition, the proceeds from divested assets could be used to invest in Nigeria’s renewable energy sector to help the country achieve its strategic vision of diversifying its energy sources.
The streamlined divestment process would also make Nigeria a more attractive market in the global energy market especially as other African nations seek to court investors in their oil and gas sectors.
