Analysts fear Exxon sale flip-flop may scare away investors

President Muhammadu Buhari

President Muhammadu Buhari’s flip-flop over the sale of Exxon Mobil Corp.’s assets could discourage investment 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, told Bloomberg 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.

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.

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