AfCFTA Implementation Sparks Domestic Hydrocarbons Market's Creation

Nigeria’s energy achievements have been largely attributed to participation of international oil companies (IOC), including TotalEnergies, Shell, Eni, Chevron and ExxonMobil.

AfCFTA Implementation Sparks Domestic Hydrocarbons Market's Creation

Local content laws and the implementation of the African Continental Free Trade Area (AfCFTA) have sparked the development of a fiercely competitive domestic hydrocarbons market within largest oil producer in Africa.

Nigeria is the largest oil producer in sub-Saharan Africa and one of the oil and gas markets on the continent. Nigeria’s energy achievements have been largely attributed to the participation of international oil companies (IOC), including TotalEnergies, Shell, Eni, Chevron and ExxonMobil.

However, with IOC divestment from key hydrocarbon assets, local companies have stepped up, driven by local content-oriented regulation and the implementation of the African Continental Free Trade Agreement (AfCFTA).

The Nigerian government established the Nigerian Oil and Gas Industry Content Development (Local Content Act) in 2010 to promote indigenous participation in the sector.

The Act prescribes minimum thresholds for the use of local products and services, the promotion of skills and technology transfer, value addition and job creation, and the awarding of oil and gas contracts and undertakings to local companies.

In this regard, the regulation has been crucial in enhancing the role that local businesses play while also fostering fierce domestic competition in Nigeria.

Nigeria, oil producer in Africa, is committed to significantly raising local content throughout the sector, and is currently debating a Bill for the amendment of the Act that would broaden the definition of Nigerian companies, increase capacity compliance, and revise the minimum target levels for imported goods.

The implementation of the Petroleum Industry Act (PIA) in 2021, which is a significant driver of Nigeria’s domestic market, has further bolstered that market.

The legislation primarily focuses on revenue and natural resource management, whereas the PIA involves a complete overhaul of the oil and gas industry, commercializing the NNPC, establishing two regulatory agencies, and ensuring increased transparency and accountability. The Local Content Act is still essential in the nation and will continue to grow the domestic economy.

The AfCFTA’s implementation in January 2021 only served to increase local companies’ participation because a supportive environment had already been established to encourage it, opening up new possibilities for intra-African trade and commerce.

In order to create a single market for goods, people, and services, the AfCFTA specifically entails the removal of red tape, the simplification of customs procedures, and the reduction of tariff and non-tariff barriers.

The AfCFTA has improved regional supply networks, domestic job opportunities and capacity building, allowing Nigerian companies to benefit from improved export opportunities, regional investment and access to new logistic and distribution supply chains. This has enabled Nigerian companies to increase their penetration in regional markets, ensuring increased competitiveness.

Local businesses in Nigeria have significantly increased their participation in the sector thanks to the PIA, the Local Content Act, and the opportunities made possible by the AfCFTA.

AOS Orwell, the largest indigenous oilfield services provider in Nigeria, Tecon Oil Services, which offers a wide range of services to E&P firms operating in Nigeria’s upstream sector, and Century Energy Services Limited, one of the largest providers of Operations & Maintenance services in west Africa, have all positioned themselves as key enablers of the expansion of the country’s oil and gas market.

Companies such as the NNPC, Amni International Petroleum Development Company, Emerald Energy Resources, Frontier Oil Corporation, South Atlantic Petroleum, and Eorton E&P are driving Nigerian E&P activities. These companies are leading the country into a new era of domestic market growth while increasing the penetration of Nigerian companies in regional markets.

Nigeria has partnered with the African Energy Chamber (AEC) for the 2022 edition of the continent’s premier energy event, African Energy Week (AEW) 2022.

The theme is ‘Exploring and Investing in Africa’s Energy Future while Driving an Enabling Environment’. Nigerian companies will participate in panel discussions, debates, and networking functions to lead dialogue and decision-making regarding Africa’s energy future.

AEW 2022 is an annual conference, exhibition, and networking event that unites African energy stakeholders with investors and international partners to drive industry growth and development and promote Africa as a destination for energy investments.

Key organisations such as the African Petroleum Producers Organization and African heavyweights have partnered with AEW, strengthening the event’s role in Africa’s energy future.