Ibe Kachikwu wants to give you 50 billion reasons to invest Nigerian oil. That was the message delivered to US investors by the Nigerian Petroleum Minister. Speaking in Houston, Texas on Tuesday, Dr Kachikwu said that the Government's recently unveiled Economic Recovery and Growth Plan (ERGP) would spawn strategic and economic partnerships in excess of $50 billion (1.58 trillion Naira) over the next four years.
He told investors that under President Muhammadu Buhari, the “old” Nigeria would disappear.
The minister broke the figures into various investment areas, as set out in the Nigeria Oil and Gas Roadmap, which sets out the sectors path to recovery in more details.
“This roadmap presents exciting opportunities for financial and strategic partnerships in excess of $50 billion (about N1.58 trillion).
“About $13-17 billion will go to the upstream for the development of upstream gas fields with a total of 37.4 trillion cubic feet.
“$14-17 billion will go to the Trans-Nigeria gas pipeline project, gas revolution industrial park at Ogidigben and three power plants for additional 3.2 GW capacity in the gas and power sector.”
“In the downstream sector, about $3–3.9 billion will go to revamping of liquefied petroleum gas, building of new Compressed Natural Gas plants across the country and to pipeline and storage tank constructions.
It is also reported that $2.5-5 billion will be invested in licensing and establishment of modular refineries, collocate refinery within Kaduna Refining and Petrochemical Company (KRPC) and rehabilitating/upgrading the three refineries.
He also promised that the much delayed Petroleum Industry Governance Bill – a mammoth piece of legislation, eight years in the making, will be passed by Nigerian legislature before the end of the second quarter. The reforms would issue in a new era of ease of doing business in Nigeria, with progress already made.
Kachikwu has to be bold and he has to make big promises. Oil prices are rising and every minute Nigeria doesn't capitalise on the upsurge, its economic woes are compounded. The economic plan is not worth the paper it is written on, however, without a convincing vision for implementation.
Kachikwu is a sounds politician – a refreshing break from his predecessors – but the problem is that he is a salesman for damaged goods.
Investors need confidence. In this case, confidence that the Nigerian government will deliver on promises, particularly around the reforms to the upstream sector – namely giving it a clear fiscal framework, whatever the particulars, around which firms can plan and invest.
The Nigerian Government has promised to deliver before on passing the Petroleum Industry Governance Bill on countless occasions over the years. And investors know the best predictor of future behaviour is past behaviour.
The question will be whether Kachikwu can convince anyone that the progress is real. So far, there is little substantive. Positive signals include the sector roadmap, a frank acknowledgement of previous failings (hence the reference to the “old” Nigeria) and the express need for urgency.
Counting against him is his boss: President Buhari. Despite coming to office on a wave of optimism in 2015, the economy has been in reverse gear ever since, falling into a year long recession. To make matters worse, during the period of illness where the President spent two months in London, and his more agile Vice-President Yemi Osinbajo took the reigns, the economy seemed to lurch forward in a sudden spate of progress.
The performance of the economy will come to fruition or it will not – either way, it is affected by external factors such that, whether speaking to a voter or an investor, the Government will plead that they are doing what they can; that they are seeing steady progress.
However, on passing the sorely needed Petroleum Industry Government Bill, this is something the Government does have the resource to deliver on. Passing this in the timeframe set out by the Minister in Euston will be a sign of real progress. Failure will be an inexcusable sign that to petroleum investors that Nigeria is still not worth investing in.