Experts have implored those who invest in the Oil & Gas sector of the country to be very careful and properly calculate their steps before taking them. This was after there was a rush by investors after the recent stability in oil prices and production in Nigeria.
This is only reasonable as one can never be too careful and the charts can change at anytime. So though everything might look so rosy at the moment one should also be ready to face some unforseen situations. Like the saying goes hope for the best but prepare for the worst.
The country’s oil industry maintained a good margin from the bounce back it made in 2017. It is the hope of many that these good times continue and the margin and recoveries made be maintained for a very long while.
More so, the uncertainty that has reduced capital investments particularly in offshore exploration and development will be tackled with the passage of the Petroleum Industry Governance Bill, but presently investors should take the necessary precautions to protect their investments and take absolute care while over-investing and gaining excessive leverage, as it would be more difficult to recover in case of any suprises in oil prices or unforeseen situations.
Nevertheless, everyone is hoping for the best that this recovery would be maintained in the short term to medium term.
Throwing more light on the recovery of the sector in 2016/2017, the sector had a very challenging 2016 but despite this supposed set back it bounced back and had better results by the end of 2017.
An obvious evidence of this was that a lot of investors grew their topline in 2017 despite the depressing results of 2016.
There were various reasons given for this rebound in the industry. One of these reasons is the oil price which improved in 2017 after the global oil price crash of 2014 to 2016.
There is a very strong positive relationship between the industry’s oil prices and income level. It is quite expected that the Higher the oil prices not just will there be better profit margins for operators, but investors will be motivated into investing in profitable capital expenditure to improve and grow their oil reserves.
Another main reason that contributed to the rebound is the decline of geo-political risks particularly the issue of militancy in the Niger Delta region of the Nigeria. The militancy situation was very bad and led to a lot of loses which adversely affected the sector. Their activities included disruptions of production, pipeline vandalism amongst others.