The Nigerian oil and gas industry lacks transparency, accountability and good governance, according to a report by the African Development Bank, AfDB.
The AfDB, in its African Economic Outlook for 2013 and 2014, further lamented that Nigeria’s economy is dependent on sectors that are either climate sensitive or contribute to climate change, such as oil and gas, as well as agriculture, forestry and fisheries.
The report said that the Nigerian environment is increasingly threatened by natural disasters, such as drought, desertification and floods, which have threatened the livelihoods of farmers and food security in recent years.
The AfDB further stated that wastage of oil resources, pollution from oil exploration activities and gas flaring in the Niger Delta, remains a concern to the country.
“Furthermore, to curb wastage and introduce fiscal prudence in the management of oil resources, the government established the Sovereign Wealth Fund (SWF), with strong institutional oversight responsibilities.
“Also, the government introduced the Petroleum Industry Bill (PIB) (currently under consideration by the national assembly), aimed at further enhancing transparency, accountability and good governance in the petroleum industry,” the AfDB noted
It said, “Nigeria is the largest oil producer in Africa and the tenth largest in the world, averaging about 2.3 million barrels per day, with 37.2 billion barrels of proven oil reserves.
“Despite these impressive oil resources, the contribution of Nigeria’s oil and gas sector to the national Gross Domestic Product, GDP in 2012 was only about 14%. This is the direct consequence of the importation of 80 per cent of the goods and services needed for projects in the sector. Nevertheless, about 79 per cent of federally collected revenue and 71 per cent of total export revenue are from the oil and gas industry.
“Even though Nigeria is the tenth largest oil producer in the world, it imports about 85 per cent of its refined petroleum products due to the low capacity utilisation (around 30 per cent) and frequent breakdowns of its refineries.”
The AfDB said further, “The infrastructure deficit in Nigeria is a major bottleneck for the structural transformation of the Nigerian economy. This is particularly so in the electric power industry and road and rail transport.
“Increased public sector investment in infrastructure, improved project implementation and the leveraging of private investments to complement the efforts of the government through privatisation/concessioning and Public-Private-Partnerships (PPPs) are critical.
“This is a major priority for the current administration, and improvements have been observed in critical infrastructure development in the country. However, progress in PPPs has been slow.
“Nigeria continues to be ranked very low in the World Bank Doing Business report. This is because of unfavourable physical, institutional and regulatory environments for doing business in the country.
“The time it takes and the cost of starting and operating a business, plus trade regulations, taxation, and the state of infrastructure, are often cited as constraints to doing business. They need to be addressed. Various initiatives by the government to tackle these problems have slightly improved the business and investment climate.”