Nigeria, Africa’s biggest oil producer, may attract more U.S. investment if the oil and gas sector becomes clear and a fuel-price peg is removed, based on a U.S. official.
“Nigeria needs to think strategically about what is going to make it a more attractive destination,” Brent Omdahl, a commercial counselor at the U.S. Department of Commerce, mentioned in an interview in Lagos. “Our investors are keen to compete on good phrases for new investments if there’s a clear process to attempt to win new oil opportunities. What’s difficult or a disincentive to investors is when offers are done, and then the contracts are not honored.”
Controls on energy costs are also constraining funding, according to Omdahl, who are leaving Nigeria this month. The country’s national petroleum firm imports most gasoline below a swap program and have capped the pump value at 145 nairas ($0.40) per liter – one of many lowest costs worldwide. However, that system price the government virtually $2 billion in subsidies last year, according to the International Monetary Fund, which has referred to as for the cap to be lifted.
The controls “perpetuate a system where solely sure people profit,” Omdahl stated. “Why not open it up and let everyone profit from it. That’s cash that can be used in making investments in refineries and unexpectedly you are paying less for imported fuel, and your price goes down.”
Omdahl additional stated that an accumulation of “easy” loans from China risks increasing debt-servicing prices, and warned towards missing out on financing opportunities from multilateral development banks with additional rigorous requirements.
Nigeria has increased borrowing from China in recent times to finance railways, airports, and energy crops. Loans from China stood at $2.55 billion as of March 31, which is about one-tenth of Nigeria’s external debt stock, based on the nation’s debt management workplace. Whereas Nigeria has a relatively low 19% ratio of debt to a gross domestic product, debt servicing takes up about 69% of government earnings, IMF data present.