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IOC DIVESTMENTS AND THE BURDEN ON INDIGENOUS OPERATORS
BENJAMIN O. AJAYI contends that the
wave of divestment will test Nigeria’s capacity to manage its own resources responsibly
For several decades, international oil companies have been the dominant players in Nigeria’s oil and gas industry. From Shell’s early discoveries in the Niger Delta to ExxonMobil’s offshore developments, these firms were responsible for most of the country’s crude production, generated substantial government revenue, and funded a large share of national spending.
In recent years, however, many of these global players have begun to move away from Nigeria’s onshore and shallow water operations. The reasons are clear: rising security challenges, persistent oil theft, and mounting environmental liabilities have pushed them farther offshore where the risks are lower and returns more predictable.
This gradual exit, often described as divestment, has created room for Nigerian indigenous companies to acquire strategic oil blocks once operated by the majors. Among the most notable deals are Shell’s 2.4 billion dollar sale of its onshore portfolio to the Renaissance Consortium, ExxonMobil’s 1.28 billion dollar agreement with Seplat Energy, and TotalEnergies’ proposed 860 million dollar sale of its interest in Shell Petroleum Development Company to Chappal Energies. On the surface, these transactions suggest progress, a shift toward local ownership and self reliance.
But a deeper question lingers. What does this mean for the daily lives of Nigerians and the broader economy?
Oil production goes beyond a change of ownership. These assets supply crude to refineries, power industries, and influence the price of petrol, diesel, and cooking gas for every household. If new operators struggle with financing or operational efficiency, production could decline, squeezing government revenue and foreign exchange inflows. This would weaken the naira, raise import costs, and fuel inflation in food, transport, and essential goods, realities Nigerians already face.
For host communities, the transition offers both hope and uncertainty. Local ownership should translate to faster responses to oil spills, stronger community engagement, and more jobs for indigenes. Yet without adequate financing and governance, those expectations could fade.
The Petroleum Industry Act 2021 sought to address these concerns through the Host Community Development Trusts, designed to channel three percent of operators’ annual budgets into local development. Implementation, however, has been slower than many hoped, leaving years of neglect still unhealed.
Financing remains the greatest challenge. Acquiring and operating billion dollar oil blocks demands huge capital at a time when global banks are retreating from fossil fuel projects. Nigerian banks, though improving, lack the deep pockets to finance large scale acquisitions alone. Indigenous operators must therefore rely on regional financiers, private investors, and Afreximbank facilities, often at higher borrowing costs. This can delay critical infrastructure repairs, environmental remediation, and field upgrades.
Nigeria’s oil revenue still funds a large portion of public salaries, infrastructure projects, and debt servicing. If indigenous operators succeed, the nation stands to retain more value through jobs, taxes, and local contracting. But if they falter, production decline and reduced foreign exchange inflows could deepen inflationary pressures.
This wave of divestment is more than a business reshuffle. It is a test of Nigeria’s capacity to manage its own resources responsibly. The performance of firms like Renaissance and Seplat will determine whether local players can sustain production, meet environmental obligations, and rebuild community trust.
If they rise to the challenge, Nigeria could turn this transition into a story of empowerment, proof that the country can control its energy destiny. If not, the burden of divestment may simply replace one set of problems with another.
From the fuel queue commuter to the market trader, every Nigerian has a stake in how this story unfolds.
Ajayi is an energy expert
