Government and political environment
Nigeria gained independence from the United Kingdom on 1 October 1960 and became a republic in 1963. The current Constitution of Nigeria was enacted on 29 May 1999, under Nigeria’s Fourth Republic. The Constitution provides for three tiers of government, namely the Federal Government at the centre, the governments of the respective 36 States and the municipal authorities in the 774 local government or area councils that make up the 36 States and the Federal Capital Territory.
At all the levels of government, there is a separation of powers among the executive, the legislative and judicial arms of government. The executive powers of the Federal Government are vested in the President who is elected for a four-year term, subject to a limit of two terms. The legislative powers are given to the National Assembly which comprises two chambers, namely: (i) the Senate; and (ii) the House of Representatives, while the judicial powers are vested in various courts with the Supreme Court of Nigeria being the highest court in-country.
Economic environment
Nigeria ranks as Africa’s largest economy3. It relies heavily on oil as its main source of foreign exchange earnings and government revenues, with crude oil accounting for an estimated 83% of total export earnings and 70% of fiscal revenues1. In 2020, Nigeria experienced its deepest recession in two decades, but growth resumed in 2021 as pandemic restrictions were eased, oil prices recovered and the authorities implemented policies to counter the economic shock4. As a result, the Nigerian economy grew by 2.6% in 20214.
Prolific resources and a well-established oil and gas industry
Nigeria is estimated to hold approximately 193 Tscf of proved natural gas reserves, making it the tenth largest gas reserve holder in the world and the largest in Africa1. Nigeria has proven oil reserves of approximately 37.0 billion, ranking as the second largest in Africa and the tenth largest in the world1. In 2021 Nigeria produced an average of 1.79 MMbopd1, making it the largest oil producer in Africa, with substantially all production coming from the Niger Delta region. Oil and gas industry majors and contractors have been operating in Nigeria since the 1950s but there has been a general trend for the oil majors to sell their interests in marginal onshore and shallow water oil fields mostly to Nigerian companies and smaller international oil companies as they focus on deep offshore exploration and production. Attractive risk-adjusted upstream and midstream opportunities, coupled with well-established oil and gas service infrastructure, provide an enabling environment for companies such as Savannah to invest and operate in Nigeria.
In 2021, the Petroleum Industry Act 2021 of Nigeria (“PIA”) was signed by His Excellency President Muhammadu Buhari, promoting a business environment conducive to oil and gas related activities. Among other things, the PIA will introduce a new fiscal and regulatory framework to keep Nigeria’s petroleum industry competitive. It is anticipated that the PIA will have a positive fiscal impact on Savannah.
Nigeria ranks 10th in terms of total oil reserves (bnbbls)1
Nigeria ranks 10th globally in terms of total gas reserves (Tscf)1
Nigeria ranks 10th globally in terms of total oil and gas reserves (bnboe)1
Gas reserves/production ratio (years)
Source: ourworldndata.org
Gas pipelines (‘000km)
Source: The World Factbook CIA.gov
Gas production and development
Nigeria has 193 Tscf of proved gas reserves, yet only produces 4.9 Bscfpd1, the majority of which is exported as LNG, with Nigeria ranking as the world’s sixth largest exporter of LNG in 20201. With a gas reserves to production ratio of approximately 110 years, the under-developed gas resources of Nigeria represent a significant opportunity to be exploited, in particular for the benefit of the domestic economy.
The Nigerian Government has stated that it sees the provision of adequate gas supply as a means of increasing industrial output and electricity supply, and thereby economic growth, prosperity and employment opportunities. In March 2021, the Government formally launched Nigeria’s Decade of Gas to capitalise on these opportunities. The gas distribution network in Nigeria is a significant factor holding back the development of gas, with just 4,500km of gas pipelines in the country, which compares unfavourably on a worldwide basis7. This lack of infrastructure discourages development of gas fields due to the high cost of building pipelines, and the availability of gas likewise discourages potential major energy consumers from switching to gas. Savannah’s Accugas pipeline network is one of the very few privately owned pipeline systems built in Nigeria and ranks as one of the largest privately owned gas transportation and distribution networks in sub-Saharan Africa.
1 BP Statistical Review 2021.
2 IMF 2022 statistics, World Population Review 2022
3 Statistica 2021.
4 IMF 2021 Statistics.
5 OPEC Monthly Oil Market Report, March 2022
6 World bank 2021.
7 CIA World Fact Book 2021.
8 Nigerian Electricity Regulatory Commission.
9 World Bank 2022