President Muhammadu Buhari’s flip-flop over the sale of Exxon Mobil Corp.’s assets could discourage investment in Africa’s largest oil producer in the wake of industry reform meant to grow the sector. 

A $1.28 billion bid by Lagos and London-listed Seplat Energy Plc for shares in Exxon’s local subsidiary was initially backed by Buhari despite opposition from the state-owned Nigeria National Petroleum Company, Exxon’s partner on the blocks with a total capacity of 95,000 barrels of oil equivalent a day. 

Buhari, who also doubles as oil minister, went on to reverse his decision, citing a lack of coordination among government agencies and after the regulator, the Nigerian Upstream Petroleum Regulatory Commission, publicly rejected his approval. 

The deal would have been the first major transaction to be announced since Nigeria passed sweeping legislation aimed at bolstering oil and gas investments after two decades of uncertainty. Buhari’s administration is trying to reverse dwindling production and attract major investment into the sector that generates more than 90% of export earnings.

Investors that have acquired Seplat’s shares following the approval of the deal will now be concerned about how this ends, Mariam Olabode, oil and gas analyst at Lagos-based Afrivest West Africa, said by phone. “The issue of oil theft, vandalism and insecurity along the pipelines is still there and they remain a concern to investors,“ she said. “Now, we have this acquisition dispute.”

Potentially worse is the public contradiction between Nigeria’s president and its oil regulator having “a knock-on effect on other deals that are waiting on the outcome here,” said Gail Anderson, research director at consultancy Wood Mackenzie Ltd.

Indecisiveness

The debacle isn’t the first display of indecisiveness in Nigeria’s oil sector under Buhari. Early last year, petroleum licenses belonging to Chinese-owned Addax Petroleum Corp were revoked, restored and revoked again this year. 

Rampant crude theft and insecurity in the Niger River Delta, where most of the oil is produced, has cut production to an all-time low, with the country unable to meet its set OPEC quotas. Meanwhile, oil majors are planning to exit part of their investments in Africa’s most populous country. 

Oil majors will now look at their exit strategies before investing and possibly negotiate it from the outset, said Ayodele Oni, partner at Bloomfield Law Practice in Lagos. “The optics are not very good for the country,” Oni said. 

Bloomberg