The Nigerian economy remains dependent on oil, which provides most foreign exchange earnings and government revenue. However, the government is working to diversify the economy. Despite declines in the oil sector during the global recession, overall GDP growth was positive due to strong performance in other sectors like telecoms and agriculture. Inflation has remained around 11% due to stable currency and prudent fiscal policies. However, more work is needed to reduce poverty levels according to World Bank data. The NEEDS plans aim to stimulate the economy and reduce poverty through private sector growth, job creation, and improved social services.

1. Corporate NIGerIa
The Business, Trade and Investment Guide 2010/2011
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© Corporate Nigeria 2010/2011 is a
Corporate Guides International publication.

2. C ON TE N TS
 Country Profile  Economy
08 Nigeria at a Glance 34 Economic Overview
10 Nigeria Country Profile 38 Nigeria's Economic Growth
42 Interview: Dr Emmanuel Egbogah,
 History & Culture P.Eng, (OON), Special Adviser to the
16 History & Culture Overview President on Petroleum Matters
20 Nigerian Leaders 1960–2010
 Foreign Direct Investment
 Politics 46 Foreign Direct Investment Overview
26 Politics Overview 48 Interview: Engr. Mustafa Bello (FSNE),
30 Interview: Mr. Odein Ajumogobia (SAN), CEO/Executive Secretary of Nigerian
Minister of Foreign Affairs Investment Promotion Commission (NIPC)
32 Interview: Mrs. Farida Mzamber Waziri, 54 In Focus: Eko Atlantic
Executive Chairman, Economic and Financial 60 Incentives for Investors
Crimes Commission (EFCC) 62 Doing Business in Nigeria
66 Interview: Mr. Mirko Plath, Managing Director,
Weststar Associates Ltd
70 Interview: Dr. Bamanga Tukur, President of
the African Business Roundtable (ABR)
and Chairman NEPAD Business Group
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3. CONTENTS
 Special Investment Destinations  Banking, Finance & Insurance
74 Kano State: History and Background 102 Banking & Finance Overview
80 Interview: His Excellency Mallam Ibrahim 106 Interview: Mr. Stephen Olabisi Onasanya,
Shekarau, Executive Governor of Kano State CEO, First Bank of Nigeria
82 Bayelsa State: History and Background 111 In Focus: First Bank of Nigeria
90 Interview: Chief Timipre Sylva, Executive 114 In Focus: Commerzbank
Governor of Bayelsa State 116 Nigeria Banking Developments 2010:
A New Broom Sweeps Clean
120 In Focus: Guaranty Trust Bank Plc
 Legal & Accounting
92 What You Need to Know About
Doing Business in Nigeria  Energy
101 In Focus: Kenna & Associates 124 Energy Overview
128 A New Era for Oil
132 Nigeria and OPEC
140 Natural Gas in Nigeria
142 Nigerian Liquid Natural Gas
144 Electricity in Nigeria
148 Alternative Energy
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4. C ON TE N TS
 Infrastructure – Telecommunications & IT  Industry
152 Telecoms Overview 190 Industry Overview
156 Interview: Mr. Steve Evans, CEO 194 Nigerian Sugar
Etisalat Nigeria 196 Beer Industry
162 Internet Taking Off 198 Nigeria’s Trade Relations
164 Mobile Market Matures
166 Innovation in ICT
 Solid Minerals
200 Solid Minerals Overview
 Infrastructure – Transport 204 Interview: Arc. Musa Mohammed Sada,
168 Transport Overview Honourable Minister of Mines
172 Interview: Mr. Michael Druce, and Steel Development
Managing Director DHL Express Nigeria
179 Facts & Figures DHL Express Nigeria
180 Aviation in Nigeria
184 Investing in Transport
188 Firsts in Transport
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5. CONTENTS
 Agriculture  Listings
208 Agriculture Overview 234 States of the Federal Republic of Nigeria
212 Cocoa Growing 235 Good to Know – Nigeria
214 Cassava – a Multi-Purpose Plant 238 Airlines
216 Nigeria’s Food Security 239 Hotels
242 Diplomatic Missions Abroad
249 Foreign Embassies in Nigeria
 Construction 254 List of the Federal Cabinet
218 Construction Overview 255 Weblinks Corporate Nigeria
256 Imprint
 Tourism
222 Tourism Overview
228 Interview: Mr. Panos Panayis,
General Manager Eko Hotel
& Suites, Victoria Island
233 In Focus: Eko Hotel & Suites Lagos
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CO r PO raTe g UiDe S N igeria 7

6. e c ono m y
Economic Overview
Diversification will support sustainable development
£ Although Nigeria’s economy is still
dependant on its oil sector, which pro-
vides 97.5 per cent of foreign exchange ... stability of the naira, which has held
earnings and roughly 80 per cent of steady against the US dollar throughout the
budgetary revenues, the government is year at about NGN150 to USD1, should stop
beginning to take the necessary steps any further inflation increase.
towards diversification. Despite declin-
ing output from the oil sector (which
together with gas still accounted for 17 sis, means the inflation rate has held at USD216.8 billion. Other sources put
per cent of GDP in 2009), strong per- about 11 per cent for most of 2010, up the 2008 purchasing power parity GDP
formance in other sectors kept the over- from 2007’s 5.4 per cent. This is still a at USD336.2 billion. GDP per capi-
all growth rate at 6.1 per cent in 2008, a significant improvement on 2005, when ta remains low, at USD1431, despite
slight fall from 2007. the rate stood at 17.8 per cent, and Nigeria’s oil wealth. The World Bank
December 2008, when the rate was 15.1 estimates that 54 per cent of the popu-
By 2009, despite the global economic per cent. The stability of the naira, which lation has a daily income of less than
crisis and weak oil sector, Nigeria had has held steady against the US dollar one US dollar.
a real GDP growth rate of 4 per cent, throughout the year at about NGN150 to
projected to rise slightly higher by the USD1, should stop any further inflation The Obasanjo regime recognised
end of 2010 and to a respectable 5.5 increase. that wealth redistribution was central
per cent by the end of 2011. However, to improving Nigeria’s economy and
the global recession, coupled with ris- The Organisation for Economic security, resulting in the launch of the
ing food prices, and the drying up of Co-operation and Development (OECD) National Economic Empowerment and
lending as a result of the banking cri- estimates the country’s GDP as being Development Strategy (NEEDS) in 2004.
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7. e conomy
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CO r PO raTe g UiDe S Nigeria 35

8. e c ono m y
The concept behind NEEDS and its suc- and per capita income of no less than financing, foreign direct investment
cessor NEEDS 2, which replaced NEEDS USD4000 by the year 2020, putting it in (FDI) and commodity prices.
in 2007, was to introduce an integrat- the top 20 economies of the world.
ed development plan, aimed in part at In Nigeria’s case the effects were first
reducing poverty. The national medium Since its introduction in 2003, NEEDS felt through a steep drop in oil’s export
term plan would be co-ordinated with has made great strides forward in mac- value, where the US is by far the coun-
a state-level plan: the State Economic ro-economic stability through stringent try’s biggest trading partner. The EU,
Empowerment Development Strategy fiscal discipline and inflation control but which is closely linked to the US econ-
(SEEDS), rolled out across the coun- as the World Bank figures on poverty omy and hence to the slowdown, is also
a significant partner. As the country is
still heavily reliant on the oil sector for
foreign earnings and government rev-
Non-oil industries including telecoms, enue, this in turn led to a sharp fall in the
financial services and agriculture have exchange rate, putting the trade balance
performed significantly better ... in deficit. Another consequence was
depreciation in share prices and mar-
ket capitalisation of quoted companies
as both foreign and domestic investors
try’s 36 states. The plan’s other aims show, the strategy has yet to benefit fled from the country’s stock exchange,
were wealth creation, generation of Nigeria’s poorest citizens. The govern- leading to an estimated 20 per cent drop
employment and ‘value re-orientation’. ment will have to work hard to meet its in remittances. FDI as a whole plum-
These four goals would be achieved by 2015 MDGs. There has been progress meted by the end of 2008, and the stock
economic empowerment – for exam- though – before NEEDS’ introduction, in market had lost 40 per cent of its value,
ple through better social welfare and 2002, GDP per capita was just USD450. compared to its peak.
education, stimulating private sector
growth, privatising state assets where
necessary, and enhancing the efficiency
of government, in part by reducing cor- NEEDS has made great strides forward in
ruption and bureaucracy. macro-economic stability through stringent
fiscal discipline and inflation control ...
NEEDS 2 was designed to achieve
two longer-term strategies: the Seven
Point Agenda, initiated by former presi-
dent Yar’Adua and the United Nations As the global recession began to Problems in the oil sector have ham-
Development Programme’s (UNDP) bite in 2008, a popular theory among pered Nigeria’s economic growth – not
Millennium Development Goals (MDG), Nigerian economists and politicians only did the price of oil fall, but the insur-
which are intended to be completed by was that the nation could avoid the worst gency in the Niger delta also resulted in
2015. As the name suggests, the Seven effects through ‘decoupling’ its trade a drop in output, leading to an estimated
Point Agenda focuses on seven key areas links from the US and concentrating production figure of as little as 0.8 mil-
that the president felt were central to on links with emerging markets, which lion barrels per day (bpd) by mid 2009,
Nigeria’s development: energy reform; make up 30 per cent of the global econ- as opposed to an average of 1.94 million
food security; wealth creation; transport omy and are responsible for 60 per cent bpd in 2008. However, by mid-2010 the
upgrading; land reforms; national secu- of world growth. It was hoped by cut- future was looking considerably brighter
rity and education. It also deals with two ting ties with the West, emerging mar- for the troubled sector. Firstly, the price
‘special interest issues’ – the situation kets could continue to grow despite the of oil had recovered to about USD75 for
in the Niger delta and the enfranchise- US slowdown. -At first, this appeared one barrel – about the same price as in
ment of disadvantaged groups. to be the case. However, by 2009 the September 2007, before the 2008 bub-
International Monetary Fund (IMF) was ble and subsequent crash. Secondly, the
The ambitious MDGs complement predicting that the financing require- Movement for the Emancipation of the
the Seven Point Agenda by setting out ments of low-income countries would Niger Delta (MEND), the group respon-
specific goals for the improvement of need to increase by up to USD25 billion. sible for much of the oil infrastructure
the welfare of the nation’s inhabitants. In the US, the collapse of most major sabotage, declared an indefinite cease-
The three strategies have laid the foun- investment banks and rapid drop in both fire on October 25 2009, which continued
dation for the Vision 2020 (or 20:2020) commodity and equity prices was having to hold in 2010. By mid-2010, produc-
plan, which envisages that Nigeria an indirect effect on emerging markets tion had risen to an estimated 2.3 mil-
should have a GDP of USD900 billion through declines in remittances, trade lion bpd, and was predicted to increase
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9. e conomy
to five million barrels as a re-education
programme for former militants was
introduced. The government aims to increase production
to 10,000 megawatts by 2011 through better
While the improvements in the oil maintenance and construction of additional
sector are undoubtedly good news for transmission lines, as well as increased use
Nigeria, the drop in revenues after the of renewable energies such as hydropower.
bubble burst in 2008 has emphasised
the need for the country to diversify its
income streams. Non-oil industries seeable financial crises. As an interim graft has been helped significantly by
including telecoms, financial services measure, the president has created two 2007 acts – the Public Procurement
and agriculture have performed signifi- an Excess Revenue Account, which Act, intended to ensure more transpar-
cantly better than the oil and gas sector, will store excess cash accruing above ency in dealing, increased fines for cor-
with a growth rate of 9 per cent from monthly projected revenues for the ruption and abuse of public funds and
2004-9. Because of the country’s budg- country. By mid-2010, the ERA contained introduced the independent Bureau for
etary reliance on oil, previous fluctua- about NGN40 billion (USD267 million). Public Procurement to vet government
tions in oil prices had led to shortfalls in procurement contracts.
state budgets, resulting in unforeseen The country still needs significant
delays or even wholesale abandonment investment in infrastructure to sustain The Fiscal Responsibility Act aims
of capital projects and delays in salary growth – the current administration to ensure increased accountability and
payment to civil service workers and believes it needs USD10 billion annu- sound management of government
contractors. The creation of the Excess ally for the next ten years. This will be finances at all three levels. A major
Crude Account (ECA) in 2003, which achieved through public private part- restructuring programme in the bank-
saves the difference in oil revenues nerships in roads, rail, waterways, air- ing sector saw the number of banks
between the price budgeted for and the ports and energy. The Nigerian National drop from 89 in 2006 to 24 in 2008, sig-
market value, alleviates these problems Petroleum Corporation is being restruc- nificantly strengthening it.
but does not entirely solve them, par- tured to enable it to compete on a global
ticularly if the future market price for level. Power cuts are still commonplace. In 2009, the Central Bank of Nigeria
oil remains low. By mid-2010, electricity production was removed the heads of several major
close to 4000 megawatts. The govern- banks for granting more than NGN747
In 2006, Nigeria was able to use its
oil proceeds to settle its debts with
the Paris and London Club groups of
creditors to the tune of over USD30 ... to ensure increased accountability and
billion – the first African country to sound management of government finances
do this. However, in November 2009 at all three levels.
the Nigerian government borrowed
USD500 million from the World Bank
to cover budget shortfalls in infrastruc-
ture and social programmes, although ment aims to increase production to billion (USD5 billion) in unsecured loans
it was able to use a concessionary 10,000 megawatts by 2011 through bet- and for having insufficient capitalisation.
terms that included a zero interest rate. ter maintenance and construction of After investigation by the Economic and
By late 2009 the federal government had additional transmission lines, as well Financial Crimes Commission (EFCC),
withdrawn a total of NGN375.035 billion as increased use of renewable energies led by Farida Waziri, several executives
(USD2.5 billion) from the ECA to aug- such as hydropower. faced charges including fraud and share
ment NGN1.377 trillion (USD9.2 billion) price manipulation. The EFCC secured
in state capital projects funding, leaving Tackling corruption is an integral 74 convictions in 2008-9 and recov-
about USD7 billion in the account, from part of Nigeria’s growth strategies. In ered assets worth over NGN15 billion
a high of USD27 billion. The account was 2005, the country successfully recov- (USD100 million), and has recently been
further depleted during 2010 and cur- ered USD505.5 million looted by its involved in several high profile cases –
rently contains about USD3 billion. former leader, the military dictator including Chief James Ibori, former
Sani Abacha. Nigeria signed a 677 mil- Governor of Delta State. ¶
President Jonathan has proposed lion euro (USD826 million) pact with the
replacing the ECA, which has no legal European Union in November 2009 to
basis, with a National Sovereign Wealth spend on peace and security, including
Fund as a means of providing for unfore- fighting corruption. The battle against
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10. e c ono m y
Nigeria's Economic Growth
Are the reforms implemented by the former administration paying off?
£ Nigeria’s problems in its oil and gas
sector have been well publicised. The
huge sector, essential to the country’s
economy, is responsible for 97.5 per
... in the non-oil sector, which has been
cent of export revenues, 81 per cent of a strong driver of growth over the last
the government’s budgetary revenues – ten years –
but only 17 per cent of Nigeria’s gross
domestic product (GDP). As a result of
the 2008/9 global financial crisis and a
sharp drop in oil prices, Nigeria’s GDP This increased growth has been helped Two areas of the non-oil sector have
growth was three per cent in 2009, com- by the introduction of the government’s excellent potential for future growth.
pared with 6.1 per cent in 2008. As oil National Economic Empowerment The first of these, the telecoms sector
prices recover, it is projected to rise to Development Strategy (NEEDS), a has seen exponential growth, with a
4.4 per cent by the end of 2010 and 5.5 medium term plan which, in its second more than 30 per cent growth rate from
per cent in 2011. phase aims to drive growth by improv- 2006 to 2008 and an estimated 32.54 per
ing infrastructure through increased cent in the first quarter of 2010, trans-
This economic growth has largely private sector participation. On a state lating to an estimated annual growth
been due to developments in the non-oil level, NEEDS has its counterpart in the rate of over 125 per cent in terms of the
sector, which has been a strong driver of State Economic Empowerment and number of mobile and fixed line sub-
growth over the last ten years – growing Development Strategy (SEEDS). In the scribers. Despite being the fastest grow-
by over nine per cent a year from 2003-7, first quarter of 2010, growth in non-oil ing communications sector in Africa and
in marked contrast to the period 1997 to output increased to 8.15 per cent, com- 8th fastest growing in the world, attract-
2000, when it grew by just 3.5 per cent. pared with 7.9 per cent a year earlier. ing USD18 billion in private investment
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Nig e ria C O rPO r aT e g U i D e S

11. e conomy
in 2009, the sector only constitutes just
under three per cent of GDP at present,
although given its exponential growth,
The Nigerian Communications Commission
there is no way this won’t increase.
(NCC) is using its Wire Nigeria (WiN) project
With a teledensity of just under 50
and the State Accelerated Broadband
per cent – Africa’s highest – there is Initiative (SABI) to provide a fibre-optic
still plenty of potential for growth. The broadband network throughout Nigeria,
Vision 20:2020 plan aims for 100 per which should spur further growth.
cent teledensity by 2020. Nigeria cur-
rently has six mobile networks: MTN
Nigeria, Globacom, Zain, Etisalat, M-tel and the State Accelerated Broadband reform after years of neglect in favour of
and Visafone. M-tel is a subsidiary of the Initiative (SABI) to provide a fibre-optic oil. The sector has been unable to keep up
formerly state-owned fixed line opera- broadband network throughout Nigeria, with population growth and Nigeria now
tor NITEL, currently in the process of which should spur further growth. spends USD2.8 billion annually on food
being reprivatised after three previous imports. Despite this, agriculture grew
failed attempts. In 2009, Globacom completed its by an estimated 5.5 per cent in the first
USD800 million Glo 1 undersea cable, quarter of 2010, slightly less than in the
MTN is currently the market leader, connecting the UK and Nigeria, which previous year. The USD450 million Third
with 33.3 million subscribers in the first should see a drastic drop in broadband National Fadama Development Project
quarter of 2010 – believed to be over 50 prices when it launches. It already (Fadama III), assisted by the World Bank,
per cent of the market. Unsurprisingly, faces competition from the Nitel Sat3 covers all of Nigeria’s 36 states and the
given the growth potential, the sector cable, MainOne – expected to land in Federal Capital Territory (FCT). Like its
has seen a heavy influx of foreign direct mid-2010 – and a future MTN WACS predecessor plans, Fadama III aims to
investment (FDI) – nearly all of the net- submarine cable. push the sector away from subsistence
works are foreign-owned. As the mar- farming towards commercial farming by
ket becomes more saturated, average Despite providing 36.5 per cent of providing training, funding for market-
revenue per user (ARPU) is starting to GDP, Nigeria’s agricultural sector, the ing and infrastructure such as irriga-
decline – most high-income users are second area with good growth poten- tion, storage and mechanised farming
already signed up, so the operators are tial, is in need of further investment and equipment.
starting to chase lower-income users.
In the case of MTN, ARPU dropped to
USD13 in 2009, down from USD16 a year
earlier. Zain’s ARPU fell from USD10 to
USD7 in the same period. The average
ARPU in 2009 for Nigeria was USD10.45,
a decline of -17 per cent in an intensively
competitive market.
The scope for growth in rural areas
is hampered by infrastructure issues.
At present, only 13 million of the 67.2
million active lines are in rural areas,
home to 80 per cent of the population.
Mobile coverage only covers about half
of the country, largely in urban areas.
As operators expand into rural areas, a
wave of consolidation, similar to that in
the banking sector, is expected to cover
the higher costs of new lines and power
generation. Many rural base stations
are powered independently because
the Power Holding Company of Nigeria
is unable to supply them. The Nigerian
Communications Commission (NCC)
is using its Wire Nigeria (WiN) project
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COr P OraTe gUiDeS N igeria 39

12. e c ono m y
Other organisations are also com- credit facilities to commercial farms taken years to come to fruition but was
mitted to the development of Nigeria’s at low interest rates. Together with the ready for gas deliveries by the end of
agriculture sector – in 2008 the African government’s Commercial Agricultural 2008. It began delivering gas to Ghana in
Development Bank (AfDB) provided Development Programme (CADP) and April 2010 from Nigeria’s oilfields, and
USD250 million to improve the process- Guaranteed Minimum Price scheme, is the first regional natural gas trans-
ing and marketing of food. In partner- which sets a minimum buying price for mission system in sub-Saharan Africa,
ship with USAID, development consul- commercial crops to encourage farm- delivering to Benin, Togo and Ghana.
tancy firm Chenomics is attempting ers to cultivate them, future growth Nigeria LNG ltd was incorporated in
to generate agricultural revenues of should be assured. May 1989 in order to produce LNG and
Natural Gas Liquids (NGLs) for export.
However, unused resources and falling
It began delivering gas to Ghana in April 2010 global demand means the environmen-
from Nigeria’s oilfields, and is the first tally damaging practice of gas flaring,
regional natural gas transmission system in losing the industry USD3 billion a year,
sub-Saharan Africa, delivering to Benin, is still widespread. The Nigerian Senate
Togo and Ghana. has set a target of December 31 2010 to
end flaring, while the Nigerian National
Petroleum Company (NNPC) is involved
USD200 million and create 100,000 jobs As in other sectors, notably manu- in constructing a trans-Saharan gas
by connecting farmers with smallhold- facturing, related industries to agri- pipeline to Algeria in order to exploit
ings in products such as rice, cowpeas, culture such as construction, roads the lucrative European market. In mid-
sorghum to international markets and and power will also need investment to 2010, NiGaz, a joint venture between the
training them in techniques to increase allow maximum growth. Even though NNPC and Russia’s Gazprom, estab-
productivity. 90 per cent of goods are transported by lished in 2009, was considering pros-
road, the Federal Ministry of Transport pecting the deepwater Nnwa Doro block,
Several states offer substantial estimates that only 15 per cent of fed- which may hold huge gas reserves.
incentives to attract further FDI to the eral roads are in good condition, while
agriculture sector. In the case of Sokoto, 30 million rural inhabitants are more Oil shouldn’t be completely writ-
the state charges just one per cent duty than 2 km away from the nearest road, ten off just yet either. A ceasefire in the
on agro-industrial machines, makes no hampering increased productivity. In troubled Niger Delta region declared
restrictions on capital allowance and mid-2010 President Jonathan unveiled by insurgents in October 2009, led to a
offers a five-year tax-free period to agri-
cultural produce processors. Kwara has
provided land and financing to displaced
Zimbabwean commercial farmers, and Biofuels production is a key driver of growth
to Kwara Casplex ltd, a biofuels com- within the sector.
pany producing ethanol from cassavas.
The project avoids electricity supply
problems by generating its own power
from agricultural waste. a plan for public private partnerships period of relative peace by June 2010.
(PPP) as a means of repairing Nigeria’s Increased production as a result of the
Biofuels production is a key driv- infrastructure quickly and cheaply. The peace, combined with a rise in the oil
er of growth within the sector. Global country requires an estimated 10,000 price to nearly USD75 a barrel means
Biofuels ltd produces ethanol from MW of electricity – presently only 4000 the sector will soon be contributing
sweet sorghum and aims to produce MW are available, and 40 per cent of the more to the nation’s economy, at a time
biodiesel from safflower and edible oil population is completely disconnected when it is urgently needed. If the secu-
from soya beans. Plans are in progress from the grid. rity situation in the Delta continues to
to build refineries in Ondo, Oyo, Osun, be peaceful, Nigeria should be able to
Ekiti and Kwara, with possible future Gas, despite being closely related to utilise money from its oil cash cow to
projects in Kaduna, Kano, Plateau, the oil sector, is still relatively underde- fund infrastructure, allowing the non-oil
Benue, Kogi, Nasarawa and Zamfara. veloped. Despite its huge gas resourc- sector’s continued expansion and fur-
The Central Bank of Nigeria is expedit- es – estimated at 5.215 trillion cubic ther diversification of the economy. ¶
ing sector growth through the introduc- metres – Nigeria has only invested in two
tion of the N200 billion (USD1.34 bil- major projects: Liquefied Natural Gas
lion) Commercial Agricultural Credit (LNG) and the West African Gas Pipeline
Scheme (CACS), which will provide (WAGP). The USD1 billion WAGP has
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13. e conomy
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CO r PO raTe g UiDe S Nigeria 41

14. e c ono m y
Interview:
Corporate Nigeria (CN) talks to
Dr Emmanuel Egbogah, P.Eng, OON
Special Adviser to the President
on Petroleum Matters
Extensive Knowledge
CN: Dr Egbogah, as Special Adviser to the President on ented to host-community involvement, local content and indig-
Petroleum Matters you play a key role in shaping the policy enous participation objectives as well as local and interna-
for one of Nigeria's most important resources. Can you tional best practices.
describe your responsibilities in this role?
Dr Egbogah: I advise Mr President holistically on matters of “It also provides for an open and
oil and gas resources planning, exploration, development, robust sector, more competitive,
exploitation, processing, transportation, management, asset technically and scientifically
valuation, economics, policy regulation, strategy, governance, proficient, and oriented to host–
legal and regulatory framework, fiscal systems/regimes and
community involvement ...”
petroleum arrangements, financing and all issues pertaining
to the orderly development of the nation’s petroleum resourc-
es. I have been leading the effort in the comprehensive reform
of the public sector of the oil and gas industry resulting in the What needs to be done to raise the profitability of the natural
preparation of the Petroleum Industry Bill (PIB), a bill that gas industry in Nigeria?
coalesces all existing 16 laws into one comprehensive, all-
encompassing legislation, which captures all the experience e The most important thing is the setting up of a commercial
of past more than 50 years in addressing all institutional mat- framework for gas to power which has resulted in the approv-
ters: policy, structure, legal and governance. The PIB is viewed al of a new gas pricing which has been most welcomed by all
as an integrated, viable, functional, sovereign enterprise with the industry players and new investors as a sure way to
geostrategic capacity and global market understanding equal- encourage investment in gas development. The government,
ing sustainable economic development. in recognition of the impact that the multiplier effect of gas
has on the domestic economy has embarked on the reform of
The PIB which is currently in the National Assembly for pas- the gas sector through the development and implementation
sage into law represents a truly unique Nigerian institutional of a Gas Master Plan, which provides a structured and holistic
structure for the energy sector with strong, stable legal and framework for enhancing gas availability and sustainability of
fiscal aspects supplemented with built-in mechanisms for supply in Nigeria and for export.
transparency and accountability, which, in the aftermath of the
near-collapse of the global financial system, have become the The Gas Master Plan aims to address some of the challenges
essential tools to secure investment and capital flows into confronting the Nigerian gas sector, notably that of inadequate
Nigeria. It also provides for an open and robust sector, more infrastructure and commercial framework. A gas pricing
competitive, technically and scientifically proficient, and ori- framework which is expected to form the basis of Gas Supply
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15. e conomy
and Purchase Agreements has been developed and has been ticular interest is the fact that Nigerian’s gas is rich in natural
approved by the Government. A key element of the pricing gas liquids. This large resource base has positioned Nigeria
framework is the introduction of sector based pricing and as one of the key players in the global energy supply and
gradual movement towards export parity in domestic gas demand mix for now and in the future.
pricing. The pricing structure requires the establishment of
the Strategic Aggregator that should essentially serve as the Unfortunately, these huge hydrocarbon resources have not
engine for the implementation of the domestic gas pricing translated to availability of petroleum products in Nigeria. Part
and the realization of commercial pricing and export parity of the problem is due to the fact that the existing refineries
for suppliers.
The framework divides the domestic market into three (3) “Of particular interest is the fact that
categories comprising Power, Strategic Gas based Industries Nigerian’s gas is rich in natural gas
(i.e. industries that use gas as feedstock e.g. fertilizer, meth- liquids.”
anol, etc.), and wholesale gas marketers who purchase whole-
sale gas for onward distribution to low pressure commercial
buyers such as manufacturing industries who typically require either do not or have never functioned to full capacity, thereby
much smaller volumes for fuelling their plants. leaving the country to depend on imported products. Also, the
downstream retail sector is highly regulated with the result
that private investors lack the necessary motivation to invest
“With this pricing approach, it is in refineries and petrochemical projects where the margins
expected that the strategic intent of are extremely tight. Government has therefore continued to
economic growth can be realized.” subsidize the importation and distribution of some of the prod-
ucts at great cost.
A pricing approach has been developed for each of these cat- A long-term solution to the problem lies in deregulating the
egories as follows: cost-plus for the power sector; netback for downstream sector in order to provide a level-playing field that
gas based industries; and alternative fuels pricing for the will encourage private investors to invest in the downstream
wholesale buyers. With this pricing approach, it is expected sector of the economy. A number of private investors have
that the strategic intent of economic growth can be realized. already signified interest in investing in refineries and petro-
chemical projects in different parts of Nigeria. These new
Despite Nigeria's vast reserves of oil and gas [36.2 billion bar- refineries could deliver up to 900,000 barrels per day of refin-
rels of proven oil reserves, OPEC 2006], fuel shortages and ing capacity. Government is currently looking at the issue of
power outages are still common in parts of the country. deregulation and consulting with all the different stakeholders
How does the government plan to address these issues in the to insure that an amicable solution is found. Meanwhile,
coming years? Government is continuously making efforts through the NNPC
to ensure that the existing refineries are rehabilitated and
e With about 38 billion barrels of oil reserves, Nigeria has the functional.
tenth largest proven oil reserves in the world, and accounts
for about a third of Africa’s oil resources. The volumes are In addition, government has embarked on efforts aimed at
contained mainly in the onshore Niger Delta and the offshore addressing internal inefficiencies which have been militating
deepwater basins of Nigeria. However, significant upsides against effective petroleum product distribution in the country.
still exist in deeper geological plays and in Nigeria’s ultra These include reducing the time it takes for the approval of
deepwater. vessels carrying petroleum products to berth at Nigerian ports
and effective monitoring of product distribution.
Nigeria is also endowed with huge gas reserves and it is
believed that Nigeria is more a Gas than an oil country. Current The government's Vision 20-2020 plan has as one of its goals
estimate of proven gas reserves is about 187 trillion cubic feet, the production of 40 billion barrels of oil reserves and a daily
which makes Nigeria the world’s 7th largest gas reserves production of 4 million barrels by 2010. Are you confident this
holder in the world. However, a US Geological Survey (USGS) target can be achieved?
study estimates that the gas reserves potential in Nigeria
could be as high as 600 trillion cubic feet. To date, there has e The Government’s aspiration for 40 million barrels of oil
not been dedicated exploration for gas and all the proven gas reserves and 4 million barrels of daily oil production in 2010
reserves were incidental to oil exploration. It is therefore not can not possibly be realized due to protracted restiveness and
unlikely that with focused gas exploration, the USGS estimate militancy in the Niger Delta, which restricted oil and gas oper-
of gas reserves can be realized. This will easily put Nigeria in ations. However, with the amnesty program now in place,
the league of top 4 gas reserves holders in the world. Of par- activities have picked up, with production currently at 2.5/2.6
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16. e c on o m y
million barrels per day and lends hope to the realization of the This strategy of comprehensive reforms is to ensure greater
aspiration probably by 2012. efficiency and effectiveness such as to meet the aspirations of
Nigerians and all the stakeholders, and also to ensure global
Vision 20-2020 also aims to address the environmental issues competitiveness.
associated with gas exploitation. Can you give some details of
the measures being undertaken to protect Nigeria's unique The Petroleum Industry Bill (PIB) on the other hand is a com-
natural environment? prehensive, all-encompassing piece of legislation given the
significant role of oil in our National economy, the size of
e The Federal Government will continue to take all necessary capital involved and the level of emotions and controversies
measures to preserve and protect our natural environment surrounding the industry. It captures all the experience of past
especially from the effects of the exploration and utilization of 50yrs in addressing all institutional matters: policy, structure,
fossil fuels which account for a significant portion of the envi- legal and governance. Most importantly and significantly it
ronmental challenges we have in Nigeria. also endorses clear separation of roles and responsibilities
across various directorates, companies and agencies.
The PIB incorporates the emergence of gas as a key element
“It is Nigeria’s modern blueprint for of the value chain, and accordingly, considers new fiscal
sustainable long-term development.” frameworks that are more robust to withstand changes.
How is the PIB perceived by the international community,
In particular, the Government will, through the Petroleum whether it be multilateral institutions, sovereign jurisdictions,
Industry Bill introduce and enforce integrated Health, Safety international oil companies (IOCs), lending institutions and
and Environmental quality management systems to ensure influential media? In my assessment, it is viewed as an inte-
compliance with local and international standards and obliga- grated, viable, functional, sovereign enterprise with geostra-
tions. This includes investment in routine flares out projects. tegic capacity and global market understanding equaling sus-
In the past investors complained that projects to stop flares tainable economic development. The PIB represents an
were not profitable. investor-friendly environment with greatly enhanced business
investment opportunities.
However, with the new gas pricing, this is no longer so. The
Domestic Gas Obligation policy is another policy which is
aimed at encouraging operators to eliminate routine gas flares
in their areas of operation. The ability of the Federal Ministry “... the expectation of Government
of Environment and other regulatory institutions to make and that the new law will transform the
enforce regulations and directives are to be strengthened. industry from “the most opaque”
to “one of the most open and trans-
Corruption and ongoing disputes in the Niger Delta have had parent in the world”
an adverse effect on both the productivity and image of the
Nigerian oil and gas industry. What is your view of the current
security and management of the oil and gas industry? The PIB will serve to promote transparency in the operation
of the oil and gas industry in Nigeria. Transparency, good
e Federal Government of Nigeria, through a comprehensive governance and accountability will be promoted through the
reform agenda, wishes to reposition the industry for greater removal of confidentiality, which in a way encourages corrup-
effectiveness and efficiency which will serve as a bedrock upon tion. With the passage of the PIB, Petroleum Prospecting
which the Nation’s Vision 20-2020 will be anchored. Priority Licenses (PPLs) and Petroleum Mining Leases (PMLs) can
areas would be anchored on appropriate reforms, well- only be granted by the Minister through a truly competitive bid
planned programs and relevant trade policies with dedicated process. Such process will be open and accessible to all qual-
resources for the creation of an overall growth-inducing and ified companies. The details of all licenses, leases and con-
people-oriented development environment. tracts, and any of the changes to such documents will no
longer be confidential.
The greatest effort and investment in planning of the reforms
have been made through the launching of the National Content It is therefore the expectation of Government that the new law
Policy and the Petroleum Industry Bill, PIB. The PIB, is the will transform the industry from “the most opaque” to “one of
legislative vehicle that will be the basis for what many, includ- the most open and transparent in the world”. To that extent,
ing myself, believe will be the resolution to Nigeria’s many PIB has the prospects of bringing to an end the age-long
problems particularly that of the Niger Delta. It is Nigeria’s decadence and orgy of exploitation and corruption in the
modern blueprint for sustainable long-term development. industry.
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17. e conomy
The aim of Corporate Nigeria is to inform the global business
community about business, trade and investment opportuni-
ties in Nigeria. Why should foreign investors consider investing
“... the PIB provides for the highest
in the oil sector Nigeria? What, if anything, should be done to
regulated rate of return in the world
further open up the sector to foreign investment?
on gas pipeline and gas processing
e The Petroleum Industry Bill awaiting passage into law in the investments ”
National Assembly is an integrated, viable, functional, sover-
eign enterprise with geostrategic capacity and global market
understanding equaling sustainable economic development. guard investment in one of the most prolific hydrocarbon
The PIB represents an investor-friendly environment with provinces in the world today.
greatly enhanced business investment opportunities.
Investments in the Nigerian oil and gas industry offer some of
Opinion has been divided on whether the proposed reforms the most attractive returns in the world. For example, the
of Nigeria’s oil and gas industry will stimulate or endanger proposed terms of the deep PSC terms in Nigeria’s PIB provide
investment due to the structural, regulatory and fiscal provi- for an overall government take that is much less than in Angola
sions of the PIB. Government’s objective in carrying out the under most conditions. Due to the fact that in Nigeria opera-
reform is to reposition the industry for better performance, tions can be consolidated for Companies Income Tax and
and to also bring the industry in line with modern day oil and Nigerian Hydrocarbon Tax purposes, the profitability of the
gas industry standards of efficiency, effectiveness and trans- operations is significantly in excess of Angola for companies
parency. To achieve the reform objective, the industry will already operating in Nigeria under comparable cost condi-
require legal, structural, regulatory and fiscal changes, tions. Also, the PIB provides for the highest regulated rate of
hence the need for an all encompassing piece of legislation return in the world on gas pipeline and gas processing invest-
called the PIB. Government believes that these changes will ments where the taxation terms are among the most favour-
not only encourage investment, but will also protect and safe- able in the world. ¶
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18. I MP RI N T
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