Fitch Ratings, a global credit rating agency has said the passage of the Petroleum Industry Bill (PIB) could have positive long-term effects for both the country’s public finance as well as oil and gas production.
However, Fitch stressed the positive impact would depend on Nigeria’s readiness to implement the law to the letter.
It noted that while the bill which is awaiting the President’s assent was unlikely to have a significant near- to medium-term impact on Nigeria’s creditworthiness, it could boost oil sector investment as well as help in stabilising the sector which had long suffered from underinvestment, and potentially reverse the downward trend in oil production. A harmonised version of the long-deliberated PIB completed its passage through both houses of parliament on July 16, and is expected to be sent to President Muhammadu Buhari soon for his assent.
On the effect of the 30 per cent of the Nigerian National Petroleum Corporation’s (NNPC) profit from petroleum sharing contracts to be spent on frontier exploration, the rating agency said the near-term effects of this on the revenue remitted by the company to the government was uncertain, but it could help raise production in the longer term.
“The full impact will also depend on the details and implementation of the fiscal regime for international oil companies, as joint ventures between the NNPC and international oil companies account for the bulk of new exploration and production activity.
“If remitted revenues were lower, this would be credit negative for the sovereign in the near term, but we believe this would be unlikely to drive rating adjustments, all things being equal, particularly since Nigeria is also benefiting significantly from the recent sharp rise in international oil prices.