..Amid $1trn Economy Dream
December 15, (THEWILL) – Two critical sectors, oil, gas and telecommunications (Telecom), recorded poor foreign investment performance in the third quarter of the year (Q3 2024), according to the National Bureau of Statistics (NBS) Capital Importation report for the period.
The two sectors constitute major pillars of the economy by revenue and employment generations and, also, play a major role in the real sector development. In the past, the sectors were in the league of top Foreign Direct Investment (FDI) beneficiaries which spurred rapid growth in gross domestic product (GDP).
Their recent poor foreign investment situation, therefore, constitutes a major concern about Nigeria’s ability to attain a $1 trillion economy by 2030. It also points to a bleak future for the economic agents in the sectors.
According to the latest capital importation data released by the NBS last week, the Oil & Gas sector recorded zero investment inflow for Q3 2024 compared to $0.85 million in the corresponding period of 2023, and $5 million in the preceding quarter (Q2 2024). The sector also achieved zero capital importation in Q1 2024.
Although oil and gas remains the mainstay of the economy, accounting for about 70 percent of government revenue, over 85 percent of total exports, and 95 percent of foreign exchange earnings, it has witnessed low gross domestic product (GDP) growth in recent times.
According to the NBS, the real GDP growth of the oil sector in Q3 2024, stood at 5.17 percent year-on-year, marking an improvement of 6.02 percentage points from the -0.85 percent recorded in Q3 2023.
However, this represents a decline from the 10.15 percent GDP growth posted in Q2 2024 as Nigeria continues to struggle with ramping up crude oil output.
Further disaggregation of the reports showed that the oil sector contributed 5.57 percent to the total real GDP in Q3 2024, higher than the 5.48 percent recorded in Q3 2023 but lower than the 5.70 percent contribution in Q2 2024.
“The oil and gas sector performance has not been impressive, generally. It has suffered immense decline in recent times through a combination of negative factors – ranging from policy disorderliness to hostile community attacks and the exit of oil and gas majors amid an unmitigated plague of corruption in the industry,” said Engr. Hezekiah Omagwu, an industry expert.
THEWILL recalls that majors like Exxon, Shell, TotalEnergies, and Eni had all opted to leave Nigeria’s oil-rich Niger delta in recent years to focus on deep-water drilling, citing security concerns, including theft and sabotage.
The departure of the majors resulted in a total of 26 onshore blocks later put on offer, holding an estimated reserve of 13.76 billion barrels of oil, 2.70 billion barrels of condensate, and about 90,717 billion cubic feet of gas, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Notwithstanding the dip in the sector’s fortune, crude oil, liquefied natural gas and other petroleum gases, constitute the most exported commodities that fetch Nigeria the highest foreign exchange earnings.
According to the latest NBS Foreign Trade in Goods Statistics for Q3 2024, crude oil exports during the period were valued at ₦13.40 trillion; which represents an increase of 57.06 percent from ₦8.53 trillion in Q3 2023 and by 6.32 percent from ₦12.60 trillion in Q2 2024.
Other oil product exports in Q3 2024 stood at ₦4.57 trillion, showing an increase of 303.93 percent from ₦1.13 trillion in Q3 2023 and 53.01 percent from ₦2.99 trillion in Q2 2024.
Beleaguered telecom
The telecom sector suffered a similar fate. According to the latest capital importation data released by the NBS, the telecom sector recorded an 87 percent decline in foreign investments for the third quarter of 2024, marking a significant downtrend from the previous two quarters of the year. The NBS data shows that the sector attracted only $14.4 million in capital importation in Q3, a sharp decline from the $113.42 investments recorded in Q2 of this year.
Year-on-year, the Q3 2024 capital importation for the telecom sector also represents a 77 percent decline when compared with the $64.05 million achieved in the same period last year.
This came after years of consistent decline in investments even with a gaping infrastructure situation requiring billions of investments to bridge.
A close study of the sector’s performance showed that FDI in telecom in Q2 2024 stood at $113.4 million. While this is lower than the inflow recorded in the preceding quarter, it represents a whopping 339 percent increase over the $25.81 capital inflow recorded in the same period last year. However, the recent drop in foreign investment in the sector signals more challenging days ahead as the economy battles with high exchange rate and inflation.
Industry experts stress that the issue of forex instability which affects the operators’ ability to import equipment is still a major problem that needs to be addressed to encourage more investments in the telecom sector. Other challenges include outrageous rights of way charges, multiple taxes, high cost of diesel to power their base stations and insecurity.
The telecom industry report for 2022 published in 2023 by the Nigerian Communications Commission (NCC) showed that total investment inflow to the industry in that year stood at $399.9 billion. This represents a 47 percent decline when compared with the $753 million recorded in 2021.
Before that, capital inflow into the telecom industry stood at $942.8 million in 2019, which made the 2021 inflow a decline, when compared with the pre-COVID-19 year.
On the GDP performance, activities in Information and Communications Technology (ICT) largely dominated by the telecom sub-sector, contributed 16.35 percent to Nigeria’s real GDP in Q3 2024, a decline from the 19.78 percent it added in the previous quarter, according to the NBS.
The statistics bureau further reports that the ICT sector dominated by the telecom industry was the third-largest contributor to the real GDP in Q3 2024, coming behind only crop production and trade industries, which contributed 26.51 percent and 18.78 percent respectively.
Industry stakeholders express concern that the once-booming telecom sector in Nigeria has continued its downward spiral with a continuous decline in GDP growth rate over the last one year. This highlights the sector’s growing importance in Nigeria’s economic landscape as a growth in the sector more often than not leads to an overall growth in the economy. Telecom is the engine room of the digital economy. A steady decline in the GDP growth rate of the sector for more than a year is a clear indication that things are not going the right way.
At the time the Federal Government is driving the dream of a $1 trillion economy by 2030, there are concerns that decline in the telecom and oil and gas sectors, which had played pivotal roles in the GDP growth, signals challenging days ahead.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
