How falling investments in oil threatens Nigeria’s economy

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Oil majors’ preoccupation in PIB too
The continuing fall in investments in oil, Nigeria’s major foreign exchange earner, is threatening the fragile economy, experts have warned. Besides, the preoccupation of the oil majors in the proposed Petroleum Investment Bill (PIB) due to the fact that it allows arbitrary renegotiation of the financial terms of existing contracts is also having adverse effects on the economy.
These views were expressed by experts at the monthly Economic News and Views at the Lagos Business School (LBS), Executive Breakfast Meeting.
Experts at the September meeting observed that disruption of production activities by the militants is mainly responsible for the dwindling fortunes. Consequently, they said that investment cutbacks in upstream by the majors is now taking a toll on the economy.

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“Oil majors are concerned about the proposed PIB because it allows an arbitrary renegotiation of financial terms of existing contracts,” experts said
Indeed, they further said that the exaggerated revenue decline of 21 percent relative to a production cut of 4.5 percent is mainly due to the composition of the liftings. The resultant effect, according to them, is that Nigerian production and exports are now more from the deep off shore fields
Also, they faulted the oil concessions which are mostly under the Production Sharing Contract (PSC), but which are less revenue favourable than the Joint Ventures (JVs)
The shrinking oil revenue was also compounded by sharp drop in corporate tax collection by the Federal Inland Revenue Service (IFRS), they further observed.
Consequently, while total tax collected declined by 11.6 percent from the first quarter of 2009, total expenditure increased by 30.8 percent over the last quarter. Also, while 63.1 percent of expenditure was recurrent, 31.3 percent was for capital expenditure.
They said that the increase in capital expenditure was driven mainly by the fiscal stimulus package by the Federal Government
Observers said at the weekend that the Niger Delta issue and the PIB must be effectively tackled by the government if the much needed leap in power generation is to be achieved.