Abuja (AFP)

Nigeria attracts only a small share of oil and gas investments in Africa while it is the main producer of black gold on the continent and many of its reserves still remain to be exploited.

The sector has a reputation for being corrupt and unproductive.

Production costs are particularly high there.

And the oil-rich regions, polluted and with dilapidated infrastructure after years of exploitation, are in the grip of great insecurity.

To meet these challenges, and maximize the oil revenues of this OPEC member country, the Nigerian government has been working for the past fifteen years on new regulations.

The country which has, along with India, the largest number of people living in extreme poverty in the world and which desperately needs to find additional income, hopes that this reform will encourage investment.

Last September, parliamentarians received this new oil bill (GDP), debated several times for nearly fifteen years, which should theoretically be voted in April, and enshrined in law in May.

- What is this law about?

This law, submitted for consideration by the National Assembly, seeks to provide a legal and fiscal framework for the Nigerian gas and oil industry.

If adopted, it would make three main changes.

First, regarding royalties and taxation, the new framework is particularly complicated but it now aims to impose more taxes on production and less on profits.

More favorable or not to investments, it is difficult to decide: on the one hand, "there is a reduction in taxes and royalties", explains to AFP Gail Anderson, director of research at Wood Mackenzie, a consultancy firm specialized in energies.

But on the other hand, "there will be more costs which will no longer be tax deductible".

Second, this law aims to enact the obligation for oil companies to establish development funds for the benefit of communities living in oil-producing areas.

They will thus have to pay 2.5% of their expenses in the operating zone to supply these funds.

But "in the event that the infrastructures of the oil companies are vandalized by the communities, the companies could draw on these funds to repair them", explains Benjamin Augé, researcher at Ifri and specialist in Nigeria.

Third and last point, this law aims to transform the public oil company, the Nigeria National Petroleum Commission (NNPC), into a commercial company.

"This would allow this entity to raise funds directly on the markets, without going through the Nigerian state, which slows down the processes and does not always inspire confidence in the markets," adds Mr. Augé.

This law would also create two new regulatory authorities, with the theoretical objective of limiting in particular the powers of the Minister of Petroleum.

- What reactions to this law?

International oil companies say this law will curb investment in offshore, very costly in investment - from which half of Nigeria's production is extracted.

In a public hearing, the chairman of an association of oil producers, representing Total, Chevron, Exxon Mobil and Shell, called for royalty relief for the first five years of production for deepwater projects.

Communities say that after 60 years of environmental degradation, oil companies should pay not 2.5% of their operating income to the development fund, but 10%.

On the restructuring of the public company into a commercial entity, many analysts believe that the power will remain in the hands of the federal government, which will always be able to choose the members of the board of directors.

The examination in the National Assembly hopes to resolve these differences.

- What impact will this law have?

If the law is adopted, it will be difficult to quickly measure its effects as it will leave the choice to the companies to decide whether their activities will be regulated according to the old or the new regulations, until the end of their license.

However, it would remove the regulatory uncertainty that for years discouraged investment.

But whether it will make Nigerian oil more competitive remains to be proven.

"The security situation remains the biggest problem," said Mr. Anderson.

Armed groups, which dig holes in oil pipelines to steal production, causing ecological disasters, and which increase kidnappings for ransom on land and at sea continue to thrive.

This constant insecurity has a significant impact on the price of operations, and therefore on investment policies.

© 2021 AFP