With its performance in the Nigerian stock exchange where it has accelerated value creation for its believers, Oando is now going global, and the first major stopover is Trinidad and Tobago: “Oando Plc, a leading Nigerian energy company, has been shortlisted by the Trinidad and Tobago government as one of the three final contenders to take over operations of the country’s state-owned Pointe-a-Pierre refinery, previously operated by the defunct Petrotrin.”

I hope it wins the bid because Nigeria needs multinational companies to confront the paralysis of economic stagnation and a lost economic decade. Yes, when a country celebrates the formation of many SMEs, notice a country that is scaling poverty. In other words, a country where most people employ themselves is a poor one.

That means Nigeria needs BIG companies because those have capabilities to compound growth leverageable factors to drive value creation for the good of all. Big firms solve big frictions in markets, and you need them to balance your budget at scale. When they go global, great things happen in economies.

If we can have our companies go global, we can overcome the evolving challenges in capital importation where the numbers are crashing: “Nigeria’s capital importation in the second quarter of 2024 fell by 22.85%, from $3.37 billion in the first quarter to $2.60 billion.” In short, the foreign direct investment dropped to $29.83 million in Q2 2024, the lowest number ever recorded in Nigerian history.

So, we need these firms to go abroad and make money.

Nigeria’s Foreign Direct Investment (FDI) for the second quarter of 2024 has dropped to $29.83 million, marking the lowest level recorded based on available data up to 2013.

This is according to data from the latest capital importation report by National Bureau of Statistics (NBS).

The FDI figure represents a steep decline of 65.33% compared to the $86.03 million recorded in Q2 2023.

Oando Plc Shortlisted for Takeover of Trinidad & Tobago Pointe-a-Pierre Refinery

Nigeria’s capital importation in the second quarter of 2024 fell by 22.85%, from $3.37 billion in the first quarter to $2.60 billion, belying President Bola Tinubu’s claim that his administration attracted $30 billion in foreign investments in its first year.

This assertion was a central part of Tinubu’s Independence Day address, where he boasted about the positive impact his administration has had on the economy and foreign investment inflows.

However, the National Bureau of Statistics (NBS) Capital Importation report for Q2 2024 paints a different picture, highlighting challenges in sustaining investment growth. The NBS report indicates that the capital inflows recorded in Q2 2024 tell a more nuanced story that includes the lackluster performance of FDIs, which contrasts sharply with Tinubu’s narrative of a $30 billion foreign investment influx.

Year-on-Year Improvement but Quarterly Decline

Although capital importation in Q2 2024 rose by 152.8% year-on-year, from $1.03 billion in the same period in 2023 to $2.60 billion, the 22.85% drop compared to Q1 of 2024 suggests that sustaining momentum is proving difficult.

In terms of the composition of capital imports, Portfolio Investment was the leading category in Q2 2024, contributing $1.40 billion or 53.93% of the total inflows. This is followed by Other Investments, which accounted for $1.17 billion or 44.92%. Meanwhile, Foreign Direct Investment (FDI), which is considered a more stable and long-term form of capital, remained low at $29.83 million, representing just 1.15% of total capital importation.

The dominance of Portfolio Investments highlights the fact that investors continue to prioritize short-term, lower-risk financial instruments, such as money market securities and bonds, over long-term commitments to the Nigerian economy. This trend raises concerns about the sustainability of foreign capital inflows and the real economic impact of these investments.

Breakdown of Portfolio Investments

Money market instruments attracted the largest share of Portfolio Investments in Q2 2024, with inflows of $1.07 billion, accounting for 76.6% of the total portfolio investments. Equities received just $149.93 million, making up 10.67% of the total. Investments in bonds contributed $177.79 million or 12.6% of the total.

However, the report also highlights a quarter-on-quarter decline in capital imports into both bonds and money market instruments. Foreign capital inflows into bonds decreased by 57.75%, while investments in money market instruments dropped by 32.92% compared to Q1 2024. This decline reflects the cautious approach that investors have adopted, likely in response to market volatility and concerns about the macroeconomic environment.

FDIs have struggled in recent quarters due to Nigeria’s elevated Monetary Policy Rate (MPR), which has siphoned capital into safer, short-term financial instruments, rather than promoting investment in the real economy.

Analysts describe the low FDI figures as ‘particularly concerning,’ as this form of investment is crucial for long-term economic growth and job creation. FDI tends to be more stable and reflects a commitment to building physical assets, such as factories or infrastructure, which have lasting benefits for the economy.

Capital Importation by Sector

In Q2 2024, the banking sector recorded the highest capital importation, attracting $1.12 billion or 43.15% of total inflows. The sector has consistently led in foreign capital inflows in recent quarters, as investors have shown confidence in Nigeria’s financial institutions.

The Production/Manufacturing sector followed with $624.71 million or 23.99% of total capital importation, while the Trading sector attracted $569.22 million or 21.86%. These sectors reflect areas where foreign investors still see potential despite the broader economic challenges facing Nigeria.

Sources of Foreign Capital

The United Kingdom remained the largest source of capital imports into Nigeria in Q2 2024, contributing $1.12 billion or 43.01% of total inflows. This was followed by the Netherlands with $577.82 million or 22.19%, and South Africa with $255.98 million or 9.83%. The dominance of the UK and the Netherlands underscores Nigeria’s strong investment ties with European countries, particularly in sectors such as banking and manufacturing.

A Reality Check for Tinubu’s Economic Claims

During his Independence Day speech on October 1, 2024, President Tinubu praised his administration for attracting $30 billion in foreign investments within one year. He pointed to policy reforms, including the unification of exchange rates, subsidy removal, and incentives for foreign investors as key reasons for this surge.

While Tinubu’s reforms may have contributed to some level of investor confidence, the substantial drop in FDI for the period under review indicates that the economic environment remains volatile.

The modest year-on-year increase in capital importation is overshadowed by the quarterly drop, suggesting that the administration’s policies have not yet translated into a sustained influx of foreign capital. Analysts say that investors are being cautious, particularly with concerns about inflation, interest rates, and Nigeria’s broader economic stability.

Oando Plc, a leading Nigerian energy company, has been shortlisted by the Trinidad and Tobago government as one of the three final contenders to take over operations of the country’s state-owned Pointe-a-Pierre refinery, previously operated by the defunct Petrotrin.

This is part of the country’s efforts to restart the refinery, which has been closed since 2018 due to heavy financial losses.

During a budget presentation on September 30, Trinidad and Tobago’s Finance Minister, Colm Imbert, announced that Oando was among the top three companies selected from an initial pool of 10 proposals. The other two companies shortlisted include the CRO Consortium, a group of three Trinidadian firms, and INCA Energy, an American company.

These contenders will now enter a formal selective Request for Proposals (RFP) process, aimed at determining which company will take over the refinery’s operations.

Refinery Evaluation Criteria

The bidding process for the refinery, managed by U.S.-based Scotia Capital, began in February 2024. Proposals were evaluated based on key criteria, which include the following:

• Clear Restart Plan: Each bidder was required to provide a detailed plan and timeline for restarting the refinery, including an asset integrity assessment and utility requirements such as power, natural gas, and water.
• Financing Plan: Bidders had to present a viable financing plan that covers working capital and includes assurances to safeguard Trinidad’s fuel security, particularly through agreements with the state oil company, Paria.
• Crude Supply Management: A key aspect was the ability to collaborate with Heritage Petroleum, another state entity, on crude supply management, ensuring national energy security.
• Transparency and Openness: The bidders were required to demonstrate transparency throughout the bidding process, ensuring open communication and smooth information-sharing with Trinidad and Tobago authorities.

The Pointe-a-Pierre refinery, built in 1917, has played a pivotal role in the Caribbean oil market, supplying petroleum products to the region. However, in recent years, it became a financial burden, prompting its closure in 2018.

The facility was losing up to $2 billion annually, and by the time of its closure, the accumulated losses had reached $15 billion. The Trinidadian government currently carries a public debt of $3 billion related to the refinery’s operations.

Similar to Nigeria, Trinidad and Tobago is an oil-producing nation but has had to rely on imported petroleum products for its energy needs. The reopening of the refinery could help reverse this trend, improving both fuel security and the country’s fiscal health.

Oando’s Adding to Recent Milestones

In addition to being shortlisted for the Trinidadian refinery project, Oando has recently achieved several significant milestones. The company has reached a market capitalization of N1 trillion, placing it among an exclusive group of Nigerian firms in the “Stocks Worth Over One Trillion” (SWOOTS) club. Other members of this prestigious group include Zenith Bank, SEPLAT, BUA Cement, and Dangote Cement.

This achievement follows a remarkable surge in Oando’s stock price, which rose by 207.6% in August 2024 alone, making it the best-performing stock that month. The company’s shares traded at a volume of 547 million, contributing to its market capitalization boost. As of September 3, 2024, Oando’s stock had climbed over 700% year-to-date.

This stock performance and recent growth have been driven in part by Oando’s strategic moves, including its $783 million acquisition of Nigerian Agip Oil Company (NAOC) in August 2024. This acquisition significantly increased Oando’s interest in various joint venture assets, giving the company control over 40 oil and gas fields, 24 of which are currently producing. The NAOC deal has enhanced Oando’s capacity and solidified its position as a key player in both the Nigerian and global energy markets.

Call for Nigerian Refinery Privatization

As Oando vies for the Trinidadian refinery, industry experts have pointed to this development as a model for Nigeria, which has long struggled with its own refinery issues. Despite being Africa’s largest oil producer, Nigeria has been unable to operate its state-owned refineries effectively.

Former president Olusegun Obasanjo’s decision to sell the refineries was reversed by his successor, Musa Yar’dua. Since then, billions of dollars have been spent on rehabilitating the country’s refineries, including the Port Harcourt and Warri refineries, but these facilities have consistently failed to restart operations.

Experts in the oil and gas sector have long advocated for the privatization of Nigeria’s refineries, arguing that government ownership has led to inefficiencies, mismanagement, and waste. These experts believe that privatizing the refineries, as Trinidad and Tobago is doing with its Pointe-a-Pierre refinery, would attract the necessary investment and technical expertise needed to make the facilities operational.

It is also believed that privatization would also eliminate the financial burden of continued rehabilitation efforts, which have shown little result over the years.

In contrast to the wastage associated with the rehabilitation of these refineries, the Dangote Refinery, which is privately owned, has been cited as a successful model of refinery operations in Nigeria, proving that private-sector-led initiatives can be more effective in addressing the country’s energy demands.