The Lagos Chamber of Commerce and Industry, LCCI, has declared that the extreme dependence of government finances and external trade balances on proceeds from the sector exposes the nation to significant risks from oil price and production shocks.
The President of LCCI, Mr. Goodie Ibru, said the evolving global energy market dynamics suggest an urgent need to take a sober look at the Nigerian oil and gas sub-sector in particular and the energy sector in general, especially given the importance of the sector to the Nigerian economy.
“Despite the declining contribution to the nation’s Gross Domestic Product (GDP) – currently at 14.7 per cent, the extreme dependence of government finances and external trade balances on proceeds from the sector exposes the nation to significant risks from oil price and production shocks.
“There are profound concerns over dwindling performance of the sector which has been attributed to the structural gaps in its regulatory, fiscal and business practices which have supported high inefficiencies” he said.
Unfortunately, he said, the Petroleum Industry Bill (PIB) which was adjudged the most significant attempt to address these challenges through the reform of the governance and business structure of the sector as well as resolution of fiscal issues is yet to see the light of the day.“From 18.89 per cent in the first quarter of 2009, the year after the PIB was first presented to the national Assembly, oil contribution to GDP has fallen to 14.7 per cent by the first quarter of 2013.
“The international oil market landscape is changing very fast and eroding the competitive value of Nigeria’s oil and gas. “First, the number of countries discovering oil and gas reserves within their national boundaries is increasing; thus expanding the supply base of oil and gas products in the international market.
Also, improvement in refining technology is helping to eradicate the difference between the Nigeria light crude and the other types of crude oil; a feature that reduced the price premium on Nigerian’s bonny light for many years” he said.
Information from Vanguard was used in this report.