This write up presents the economy of Nigeria at a Glance, most especially the Oil and Gas sector of the country as well as investment opportunities in Nigeria,

1. Macroeconomic overview of Nigeria (AMINU Yakubu, 2014)
Oil and Gas Sector determines the direction of Nigeria Economy
• Nigeria has abundance of Natural Resources, especially in hydrocarbons. It is the 10th largest Oil
producer in the world and 3rd in Africa.
• Nigeria economy is largely dependent on oil, which supplies 85% of its foreign exchange
earnings.
• Nigeria is the most populous country in Africa and it is regarded as an agrarian economy with
70% of its labour force engage in Agriculture.
• Nigeria is rich in Natural resources like Natural Gas, Petroleum, Tin, Iron Ore, Coal, Limestone,
Lead, Zink, and Arable Land.
• World Bank estimated Nigerian Population to be 168.8 million in 2012 with 2.75% growth rate
and 54.7% of the population as the labour force.
Sector Growth(%) Summary for 2011 and 2012
Source: National Bureau of Statistics Source: IMF
-5
0
5
10
15
20
25
30
35
40
2011
2012
0
20
40
60
80
100
120
140
160
180
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Population(million)

2. GDP GROWTH FORECAST:
Nigeria Real Growth rate is forecast to average 6.94% in the next three years
• Nigeria’s Real growth rate is forecast to maintain average rate at around 6.94% in the next three
years compared with other Emerging Markets in West Africa having less than 4% growth.
• Floods, Oil theft, Pipeline vandalization and weak consumer demand have been identified as the
major cause of decline in oil revenue and economic activities in the last quarter of 2012.
• In the Business Sector, 30% of the Assessable Profit is charged as Tax while Exchange Rate remains
stable over time at N158 to a Dollar and N250 to a Pound Sterling.
• GDP Composition by Sectors: Agriculture 30.9%, Industry 43%, and Services 26% in 2012.
• Investment is at 18.8% of GDP while Commercial Bank Lending Rate was 16% and government debt
was 17.8 billion US dollars in 2012.
Nigeria GDP Growth Africa’s GDP Estimates 2013
Source: National Bureau of Statistics Source: Trading Economics
6.45
5.98
6.96
7.98
7.43
6.61 6.75
7.27
6.93 6.62
0
1
2
3
4
5
6
7
8
9
2007 2008 2009 2010 2011 2012 2013e 2014f 2015f 2016f
3.22
1.83
3.51
2.62
3.79
11.18
0.95
6.75
0
2
4
6
8
10
12

3. INFLATION and UNEMPLOYMENT
Inflation rate reaches lowest level in five years with rising unemployment
• In August of 2013, Nigeria annual inflation rate eased to 8.2%, the lowest in more than 5 years, as
food prices decelerated due to the onset of the harvest season.
• Unemployment rate is rising due to challenges in the Manufacturing Sector. 5.8% in 2008 and
above 20% in the Q4 of 2012.
• The Monetary Policy Committee of the Central Bank of Nigeria decided in September to leave the
benchmark interest rate unchanged at 12%. The CBN considers the present monetary policy to be
effective in stabilizing the Naira and inflation rate.
Source: Central Bank of Nigeria Source: Trading Economics
0
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012 2013e
Unemployment Rate (%)
0
2
4
6
8
10
12
14
Inflation Rate (%)

4. Export and Import:
Favourable Balance of Trade in the international Market
• Nigeria Economy often experience favourable Balance of Trade as high volume of Crude oil is
exported annually.
• Most of Nigeria export commodities are Petroleum products, cocoa, rubber whereas the Export
partners are USA, Spain, Brazil, France among others while the import partners are China, USA,
Netherlands, UK, France, Brazil and Germany.
• USA is the largest foreign investor in Nigeria with US FDI concentrated largely in
Petroleum/Mining and wholesales trade sectors. US Import from Nigeria include Oil, Cocoa,
Rubber and Food wastes. While its Export to Nigeria include Wheat, Vehicles, Machineries, Oil
and Plastics.
Source: CBN source: Trading Economics
0
20
40
60
80
100
120
1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Export and Import ($)
Export (billion $) Import (billion $)
-20
-10
0
10
20
30
40
50
Q4-2007
Q2-2008
Q4-2008
Q2-2009
Q4-2009
Q2-2010
Q4-2010
Q2-2011
Q4-2011
Q2-2012
Q4-2012
Q2-2013
%Change
Industrial output and Business confidence
% Change in Industrial
Output
%Change in Business
Confidence

5. Role of Energy Industry in Nigeria Economy:
Improvement to be achieved in the energy sector as privatization continues in
the sector
• Nigeria has significant energy resources, including over 37 billion barrels of oil, 187 trillion
cubic feet of gas and 4 billion metric tones of coal and lignite.
• Nigeria also has large amount of renewable energy resources including hydro electricity, solar
wind and biomass energy.
• Hydro resources (small and large hydro power) are estimated at 14,750 megawatt, solar
radiation is estimated as 3.5-7.0 kilowatt-hour/m2 per day.
• Wind energy potential of 150,000 terra joule per year (generated by an average wind speed
of 2.0-4.0 m/s) and biomass at 144 million tones per year.
• Nigeria is currently ranked 62 out of 75 countries on the IEA’s Energy Development Index(EDI)
• Fossil fuel account for 53% of electricity generation in Nigeria, 39% from Natural Gas while
only 7% is generated through Hydro Power Plants located through out the Country.
• Electricity generation was around kWh22billion in 2012 and there are indications of increase
as government issued more licenses to independent power producers.
• The Federal Government has signed the contract for the Zungeru Hydro-electric Power
Project, which will add 700megawatts (MW) to the National Grid when the project is
completed.

6. • Improvement is expected in the energy sector soon has government finally handed over the
Power Holding Company of Nigeria (PHCN) to the private owners.
• Over the next 7-8 years, a total investment space in excess of $28billion exists in power
generation in Nigeria. The expansion is poised to deliver considerable amount of jobs both
within the Power industry and the energy starved manufacturing sector of the economy.
• In August 2013, government issued licenses to 10 distribution companies and 4 power
generating firms. This is expected to improve power generation in the country.
• Nigeria’s daily energy consumption is 109.6KwH (per 1000 persons). On a comparative basis,
Nigeria energy consumption is low.
Source: NERC Source: UNDP World Bank
0
5
10
15
20
25
Nigeria: Electricity Generation(billion KwH)
1276
496 466
5487
109.6 301
2116
Egypt Indonesia India S.Africa Nigeria Ghana Brazil
Daily Energy Consumption (KwH per 1000 persons)

7. Overview of the Petroleum Sector:
Bonny Light is one of the world’s most expensive crude oil
• Since the discovery of Oil in 1956 in Oloibiri Bayelsa State, Nigeria has been known to
produce only high value, low sulphur content, light crude.
• Nigeria Crude Oil include: Antan Blend, Bonny Light, Bonny Medium, Brass Blend, Escravos
Light, Forcados Blend, IMA, Odudu Blend, Pennington Light, Qua-iboe Light and Ukpokiti.
• Currently, Nigeria produce 2.5million barrel of crude oil per day with estimated 37 billion
barrel proven reserve.
• Nigeria National Petroleum Corporation has four refineries with combined installation
capacity of 445,000 barrels per day.
• Natural gas reserve is estimated at about 5 trillion cum and average daily production of 30
billion cum.
• The major challenges in the industry are fluctuations in the international oil price, Oil theft
and Pipeline vandalization.
• Oil and Gas sector’s contribution to the National output is relatively small at 16% of GDP
considering that the sector accounts for over 87% of the total export earnings and 76% of
government revenue.
• Direct Employment in the Oil and Gas sector is around 22,000 persons in various
specializations.

8. Major Players in the Petroleum Sector of Nigeria:
Shell Petroleum dominates the Nigeria Petroleum Sector
• Shell Petroleum Development Company of Nigeria Limited (SPDC)
 A joint venture operated by shell accounts for more than 40%of Nigeria’s total oil production
(1 million bpd) from more than 1000 producing wells, 6000km pipelines and flow-lines, 87
flow-stations and 8 gas plants.
 The joint venture is composed of NNPC (55%), Shell (30%), Total (10%) and Nigeria Agip Oil
Company (NAOC) (5%) and it operates largely onshore on dry land or in the mangrove
swamp.
• Mobil producing Nigeria Unlimited (MPNU)
 A joint venture between NNPC (60%) and Mobil (40%) operates in shallow water off Akwa
Ibom State in the Southeastern Delta with Average production of 550,000 barrels per day.
• Chevron Nigeria Limited (CNL)
 A joint venture between NNPC (60%), Chevron (40%) has in the past been the second largest
producer (approximately 238,000 barrels per day), with fields located in warri region west of
the Niger River and offshore in shallow water and 165 million cubic feet of Natural Gas and
4,000 barrels of LPG per day.

9. • Nigerian Agip Oil Company Limited (NAOC)
A joint venture is Operated by Agip and owned by NNPC (60%), Agip (20%) and Phillips
Petroleum (20%) produces 150,000 barrels per day mostly from small onshore fields.
• Total Exploration and Production Nigeria Limited (TEPNG)
A joint venture between NNPC (60%) and Total (40%) produce approximately 125,000 barrels
per day .
• Texaco Overseas Petroleum Company of Nigeria Unlimited (TOPCON)
A joint venture operated by Texaco and owned by NNPC (60%), Texaco (20%) and Chevron
(20%) currently produces about 60,000 barrels per day from five offshore fields.
Source: NNPC
Shell
46%
Mobil
25%
Chevron
11%
NAOC
7%
Total
6%
TEXACO
3%
Others
2%
Major Oil Companies

10. PEST Analysis of the Petroleum Industry:
Political/Legal Issues:
• Licensing of Oil companies is not yet transparent enough as so many potential investors are
still unable to secure license to commence operations.
• Sets of Tax to be paid by the Oil companies are seen as a major challenge in the Petroleum
Industry Bill (PIB):
50% for onshore and shallow water areas
25% for bitumen, frontier acreages and deep water areas
• Gas flaring penalties as stated in the PIB to be equal to the amount of the flared gas is also
posing a challenge to the acceptance of the bill as all the major Gas producers flare gas.
• Dominance of few international oil companies also pose a big challenge in policy formulation
and implementation in the Nigeria Petroleum Industry.
Economic Issues:
• Inadequate power supply is a major issue in the entire economy as oil companies are
compelled to generate their power from alternative sources, this amounts to an extra cost of
production.
• Infrastructural problem such as poor road, inadequate drinkable water, poor institution and
environment is also a challenge inherent in the Niger Delta region where Oil is being
produced.
• Most financial institutions in Nigeria are not big enough to guarantee the required capital
need of the sector. Most oil companies seek their finance elsewhere in the world.

11. Social Issues:
• A wide market for petroleum product is available in Nigeria. This is due to the high number of
household and firms in need of the products.
• Pipeline vandalization and oil theft is a challenge in the Nigeria oil sector as almost 10% of
government revenue was lost in the year 2012.
• Disruption of operation by militant groups and sometimes Niger Delta youth is another
setback in the industry
• Kidnapping of foreign oil workers in the region has also impacted negatively on the oil sector
• Pipeline security contracts among some interest groups
Technical Issues:
• The PIB advocates more involvement of Nigerian in the Oil industry work but the
International Oil Companies (IOCs) are of the view that most Nigeria workers are not
qualified enough to take up major operations.
• Equipment required for oil operations are usually imported as Nigeria lacks the capacity to
produce such. Maintenance and repairs are also carried out mainly by foreign experts.
• Inadequate technicians in some core areas of oil exploration is also a challenge in the Nigeria
oil sector.
• Generally, Nigeria is still backward in terms of technology.

12. Investment Opportunities in Nigeria:
• Oil and Gas:
 Domestic Manufacturing of LPG cylinders, valves and regulators, installation of filling plants,
retail distribution and development of simple, flexible and less expensive gas burners.
 Exportation of Crude Oil and Shipping services
• Investments in the Real Estates and Hotels are also lucrative
• Telecommunication Business is recommended as one of the sectors with ample potentials.
• Power generation and distribution is also recommended as most manufacturing firms are
willing to pay the price of regular power supply.
• Nigeria wholesale and retail sector is a good one especially in the major cities.