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Confusion as Fitch doubts Nigeria’s crude-for-loans deals with India, China

Nigeria is about to tread a familiar but very vulnerable part again after it observed that earlier oil swap deals orchestrated during the last administration were infested with abuses.

This fear may have been given credence as leading global assessment group, Fitch Ratings, has expressed doubt over Nigeria’s multi-billion dollar crude-for-loans prepayment deals with India and China.

It would be recalled that the Minister of State for Petroleum, Dr. Ibe Kachikwu, recently said the country had negotiated a $15bn investment with India, where the Indian government would make an upfront payment to Nigeria for crude oil purchases.

The Senate had last week said it would probe the deal with India, and another with China worth over $80bn, with an additional $20bn deal with China’s two biggest oil companies.

Fitch said in a report yesterday that the Nigerian oil and gas sector continued to suffer from security issues and weak oil prices that had dragged down the ratings of indigenous oil and gas companies.

 “Nigeria remains Africa’s largest oil producer, but its production has dropped by 25 per cent in 2016 due to security issues and the closure of a number of export pipelines.

“Nigeria has a healthy proved reserve life of 43 years, but its future oil production will be driven by the resolution of security issues and infrastructure constraints.”

The rating agency said it viewed positively Nigeria’s recent ‘Seven Big Wins’ programme, which covered sector regulation, upstream and downstream projects, security, as well as transparency and corporate governance.

Continuing, Fitch said “Another welcome sign is Nigeria’s reported $5bn settlement with western oil majors to cover their exploration and production costs since 2010.

“On the other hand, the long-overdue Petroleum Industry Bill, a cornerstone of President Muhammadu Buhari’s oil sector reform, is still far from being passed, and the recent rebel activity in the Niger Delta region is only delaying the bill’s passing.”

It would be recalled that the rating agency had some time proposed de-consolidation and partial privation of the Nigerian National Petroleum Corporation would likely promote investment and hence benefit the country’s oil sector.

“We also remain sceptical that the multi-billion crude-for-loans prepayment deals with India and China will achieve the announced targets. Furthermore, Nigeria’s dependence on oil product imports and the low use of natural gas hamper its oil and gas sector,” the agency stated.