WHY INVEST IN NIGERIA
Nigeria is Africa’s foremost business destination second only to SA. Its currency is the Naira. N1.00 is approximately N127USD. The country operates a market economy dominated by crude oil exports with the revenue earnings from the sector accounting for 90% of forex earnings and 65% of budgetary revenues. Other exports are cocoa, palm oil, groundnuts, cotton, timber and rubber.
Nigeria’s imports are in the region of $14.54billion USD. Import commodities include machinery, chemicals, transport, equipment, manufactured goods and live animals.
In recent times, focus is being directed at non oil exports and agriculture, which presently accounts for 30% of the GDP, to diversify the economic base. Opportunities exist for the exploitation and export of natural gas, bitumen, limestone, coal, tin, columbite, gold, silver, lead-zinc, gypsum, glass sands, clays, asbestos, graphite, and iron ore, among others.
The Government has been pursuing economic reforms marked by the privatization and deregulation which seek to transfer state ownership of institutions to the private sector and so engender efficiency n the productive sectors of the economy .These are well articulated in The NEEDS programme. The reforms have led to an explosive growth in the telecoms sector after years of stagnation. The GSM has transformed the economic terrain creating employment and oiling the operations of businesses in Nigeria. The country is traversed by a network of primary and secondary roads, and has 4 international airports, and 6 seaports. It also boasts 12 Television stations and 25 National newspapers. Its internet country code is .ng
Nigeria, officially the Federal Republic of Nigeria, is a country in West Africa and the most populous country on the African continent. Nigeria shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, Niger in the north, and borders the Gulf of Guinea in the south. Since 1991, its capital has been the centrally located city of Abuja; previously, the Nigerian government was headquartered in Lagos.
The people of Nigeria have an extensive history, and based on archaeological evidence, human habitation of the area dates back to at least 9000 BC. The Benue Cross River area is thought to be the original homeland of the Bantu migrants who spread across most of central and southern Africa in waves between the 1st millennium BC and the 2nd millennium AD. However, the Nigerian state came into being on October 1, 1960 when Nigeria declared its independence from the British and at present consists of 36 states and the federal capital territory. Nigeria re-achieved democracy in 1999 after a sixteen year interruption by a series of military rulers. From 1966 until 1999, Nigeria had been ruled (except the short lived second republic, 1979 1983) by military rulers who seized power in coup d'états and
counter coups. Today Nigeria is a democratic country with tremendous market and investment opportunities.Geography: Nigeria Lies within three climatic and geographic types equatorial in the southern reaches, tropical in the central area and arid in the north fringe giving rise to rainforest, savannah and desert vegetations respectively. Nigeria is bisected by rivers Niger and Benue which merge at Lokoja, then cascade southwards to form the tributaries and creeks of the Niger Delta.
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OIL AND GAS
Since the discovery of oil in Nigeria in 1956, the government, through its
appropriate agencies like Nigerian National Petroleum Corporation (NNPC),
Ministry of Petroleum Resources and Federal Environmental Protection Agency
(FEPA), has put in place a number of policies,
agreements and regulations for the control and supervision of the oil
industry for the overall economic development of the country. Notable
policies and agreements in place include: Joint Ventures, Production Sharing
Control (PSC), Service Contract, and Memorandum of Under-standing (MOU).
THE OIL AND GAS INDUSTRY IN NIGERIA
BACKGROUND TO THE NIGERIAN PETROLEUM INDUSTRY.
Following the discovery of crude oil in 1956 by Shell D’Arcy Petroleum,
pioneer production began in 1958 from the company’s oil field in Oloibiri in
the Eastern Niger Delta. Nigeria has since made its mark as Africa’s leading
producer of oil and ranks in the top ten oil producers in the world. In
2004, Nigeria’s OPEC’s quota increased to 8.2%.
By the late sixties and early seventies, Nigeria had attained a production level of over 2 million barrels of crude oil a day. Although production figures dropped in the eighties due to economic slump, 2004 saw a total rejuvenation of oil production to a record level of 2.5 million barrels per day. Current development strategies are aimed at increasing production to 4million barrels per day by the year 2010.
CURRENT STATUS OF THE PETROLEUM INDUSTRY IN NIGERIA.
Sedimentary Basins
Table 1, lists Nigeria’s 7 main sedimentary basins with some information on size and prospectivity, main reservoirs, exploration status etc. The core producing areas cover some 60% of the total acreage of about 31,105 sq. km. The outlying areas remain a significant asset yet to be exploited.
Oil and Gas Reserves
A 2003 estimate showed recoverable crude oil reserves at 34 billion barrels. The reserve base is expected to increase due to additional exploration and appraisal drilling. Already, over 900 million barrels of crude oil of recoverable reserves have been identified. The government has also set a target to achieve a reserve of 40 billion barrels by 2010.
Nigeria has an estimated 159 trillion cubic feet (Tcf) of proven natural gas reserves, giving the country one of the top ten natural gas endowments in the world. Due to a lack of utilization infrastructure, Nigeria still flares about 40% of the natural gas it produces and re-injects 12% to enhance oil recovery. Official Nigerian policy is to end gas flaring completely by 2008. The World Bank estimates that Nigeria accounts for 12.5% of the world's total gas flaring. Shell estimates that about half of the 2 Bcf/d of associated gas -- gaseous by-products of oil extraction -- is flared in Nigeria annually. The new industry strategy is to collect the associated gas and process it into liquefied natural gas (LNG), greatly enhancing Nigerian natural gas revenues while simultaneously reducing carbon dioxide emissions
Oil Fields
Of the 606 oil fields in the Niger Delta area, 355 are on-shore while the remaining 251 are offshore. Of these, 193 are currently operational while 23 have been shut in or abandoned as a result of poor prospectivity or total drying up of the wells. Outside the Niger Delta, a total of 28 exploratory oil wells have been drilled all showing various levels of prospectivity as seen in Table 2. These wells include two (2) discovery wells in Anambra State, one (1) discovery well each in Edo State and Benue State each and Twenty-four (24) wells in the Chad Basin. However, production is yet to commence from any of the wells.
Nigerian liquefied Natural Gas:
The Nigerian LNG project is being implemented in phases with an initial
production from two trains. The plant is situated at Bonny Island. NLNG has
successfully secured market for its moderate production volume from its base
project and train three.
Sources of Gas:
The bulk of the gas for base project is mainly NAG supplied from the
following gas supplier fields:
· SPDC – SOKU;
· NAOC – OBIAFU OBIKROM;
· EPNL - OBITE;
The bulk of gas for train three will contain more of associated gas from which both LNG and LPG will be produced.
* Gas Supply Contract: The NLNG had signed Gas Supply Agreements (GSAs) with three upstream gas producers in 1992. This is aimed at securing adequate and regular supply of gas for the project. These gas producers are:
* The Shell Petroleum Development Company of Nigeria Limited (SPDC) – NNPC/SPDC/NAOC/EPNL JV: operator & sellers’ representative - SPDC (Shell affiliate);
* Nigerian Agip Oil Company limited (NAOC) – NNPC/NAOC/POCNL JV: operator & sellers’ representative – NAOC (Agip affiliate);
* ELF Petroleum Nigerian limited (ELF), (then Elf Nigerian Limited) – NNPC/EPNL JV: operator & sellers’ representative – EPNL (Elf affiliate).
These three joint ventures are expected to supply the gas requirement for the project for the next 221/2 years.
* Gas Supply Contract Quantities: The joint venture will supply a total of 302.17 billion standard cubic metres (BSCM) of feed-gas required for the NLNG’s three trains. The feed-gas for the three trains will be a combination of associated and non-associated gas. When NLNG’s train three becomes fully operational, a total of about 41.83 million standard cubic metres will be required by the plant daily.
SOLID MINERALS
Nigeria is richly endowed with a variety of solid minerals of various categories ranging from precious metals to various stones and also industrial minerals such as barytes , gypsum, kaolin and marble. Much of these are yet to be exploited. Statistically, the level of exploitation of these minerals is very low in relation to the extent of deposits found in the country. One of the objectives of the new National Policy on Solid Minerals is to ensure the orderly development of the mineral resources of the country.
There are tremendous opportunities for investments in the solid mineral sector in Nigeria. Prospecting licenses for investors (both local and foreign) to participate in the exploitation of the vast mineral resources in Nigeria is granted by the Federal Ministry of Solid Minerals.
Mineral resources that are present in Nigeria but not yet fully exploited are coal and tin. Other natural resources in the country include iron ore, limestone, niobium, lead, zinc, and arable land. Agricultural products include groundnuts, palm oil, cocoa, coconut, citrus fruits, maize, millet, cassava, yams and sugar cane. Nigeria also has a booming leather and textile industry, with industries located in Kano, Abeokuta, Onitsha, and Lagos.
Opportunities exist for the exploitation and export of natural gas, bitumen, limestone, coal, tin, columbite, gold, silver, lead-zinc, gypsum, glass sands, clays, asbestos, graphite, and iron ore, among others
Procedure for
obtaining a Mining Licence
A grant of a Mining Licence to a prospective company is subject to proof of
economic reserve of the mineral commodity for which a concession is sought.
The process involves the company first applying to the Honourable Minister
for Certificate of Entry into Mining Industry. The requirements for this
include submission of the company’s Certificate of Registration, evidence of
technical competence and of financial capability.
The next step is for the company to apply and obtain a prospecting right
(PR) to enable it carry out general and scientific prospecting for the
categories of minerals within the prospecting right. If properly conducted,
work on this right will guide the company towards zeroing into a particular
mineral within a specific land area.
The company will then put up application for an exclusive prospecting licence (EPL) in the State Mines Office where the mineral is located. This is an exploration licence for a particular mineral(s) over a particular land area which, by law, should not exceed 22 square kilometers. Once granted, the area is held exclusively to the company which will now confidently invest in mineral exploration work on the area without hindrance. This licence is renewable every one or two years depending on the nature of the terrain.
It is only after the company has satisfied itself of the availability of the mineral in commercial quantity on the EPL that it will apply for grant of a Mining Licence over the whole or part of the area covered by the EPL.
In the course of all these processes, the law insists that the company employs the services of a “technically competent person” in carrying out the prospecting under the PR, the exploration within the EPL and finally the extraction of the mineral within the mining licence area. This is necessary and to the advantage of the mining company if it is to reduce investment risks and reap the maximum benefit from the investment.
Solid Mineral Deposits
in Nigeria
Talc
Over 40 million tonnes deposits of talc have been identified in Niger, Osun,
Kogi, Ogun and Kaduna states. The Raw Materials Research and Development
Council (RMRDC)’s 3,000 tonnes per annum catalytic plant is the only talc
plant in the country. The talc industry represents one of the most versatile
sectors of the industrial minerals of the world. The exploitation of the
vast deposits would therefore satisfy local demand and that for export.
Gypsum
Gypsum is an important input for the production of cement. It is also used
for the production of Plaster of Paris (P.O.P) and classroom chalks. A
strategy for large-scale mining of gypsum used in the cement industries is
urgently required to sustain the existing plants and meet the future
expansion. Currently, cement production is put at 8 million tonnes per annum
while the national requirement is 9.6 million tonnes. About one billion
tonnes of gypsum deposits are spread over many states in Nigeria.
Iron Ore
There are over 3 billion metric tonnes of iron ore in deposits found in Kogi,
Enugu and Niger States as well as the Federal Capital Territory. Iron Ore is
being mined at Itakpe in Kogi State and is already being beneficiated, up to
67 per cent of iron. The Aladja and Ajaokuta Steel complexes are ready for
consumers of billets and other iron products for down-stream industries.
Lead/Zinc
An estimated 10 million tonnes of lead/zinc veins are spread over eight
states of Nigeria. Proven reserves in three prospects in the east-central
area are 5 million tonnes. Joint venture partners are encouraged to develop
and exploit the various lead/zinc deposits all over the country.
Bentonite and
Baryte
These are the main constituents of the mud used in the drilling of all types
of oil wells. The Nigerian baryte has specific gravity of about 4.3. Over
7.5 million tonnes of baryte have been identified in Taraba and Bauchi
States. Large bentonite reserves of 700 million tonnes are available in many
states of the federation ready for massive development and exploitation.
Gold
There are proven reserves of both alluvial and primary gold in the schist
belt of Nigeria located in the south-western part of the country. The
deposits are mainly alluvial and are currently being exploited on a small
scale. Private investors are invited to stake concessions on these primary
deposits.
Bitumen
The occurrence of bitumen deposits in Nigeria is indicated at about 42
billion tonnes; almost twice the amount of existing reserves of crude
petroleum. Analytical results suggest that this potential resource can be
used directly as an asphalt binder. Most bitumen used for road construction
in Nigeria is currently imported.
Coal
Nigerian coal is one of the most bituminous in the world owing to its low
sulphur and ash content and therefore the most environment-friendly. There
are nearly 3billion tonnes of indicated reserves in 17 identified coal
fields and over 600 million tonnes of proven reserves.
Rock Salt
The national annual demand for table salt, caustic soda, chlorine, sodium
bicarbonate, sodium hydrochloric acid and hydrogen peroxide exceeds one
million tonnes. A colossal amount of money is expended annually to import
these chemicals by chemical and processing companies including tanneries and
those in food and beverages, paper and pulp, bottling and oil sector. There
are salt springs at Awe (Plateau State), Abakaliki and Uburu (Ebonyi State),
while rock salt is available in Benue State. A total reserve of 1.5 million
tonnes has been indicated, and further investigations are now being carried
out by Government.
Gemstones
Gemstones mining has boomed in various parts of Plateau, Kaduna and Bauchi
states for years. Some of these gemstones include sapphire, ruby,
aquamarine, emerald, tourmaline, topaz, garnet, amethyst; zircon, and
flourspar which are among the world’s best. Good prospects exist in this
area for viable investments.
Kaolin
An estimated reserve of 3 billion tonnes of good kaolinitic clay has been
identified in many localities in Nigeria. Lift from page 4 and 5 of Local
Sourcing of Raw Materials.
