Implication of oil discovery and production in Lagos state

Lagos, the home to Nigeria’s most critical commercial activities has officially added another component to its already scintillating economic prospects when it was reported that it is expected to join the league of oil-producing states in Nigeria as significant amount of oil reserves were discovered in the offshore Dahomey Basin of the state.

The product in large commercial quantity was discovered after a joint venture led by Yinka Folawiyo Petroleum Company Limited which has been exploring the Aje Field offshore Lagos. The company has taken the final investment decision on the exploration of the field with drilling expected to commence soonest.

The discoveries by Afren and Yinka Folawiyo’s Joint Venture simply gives Lagos a space into the oil-producing states club, which already has 9 states, Akwa-Ibom being the largest producer of the product in the country. According to analysts, with this discovery, Lagos is set to generate more than N30 billion worth of internal revenue every month.


The state is set to face certain implications which come along with the product discovered. First of all, Lagos state will enjoy all the benefits of being an oil producing state, adding to the revenue generation for the country. By Implication, the state will be entitled to the benefit from 13% derivation fund which is meant for the development of oil communities from the Federal Government in addition to some percentage of funding for socio-economic and infrastructure development.

As an oil producing state, certainly, the revenue of Lagos state will increase drastically adding to the state’s current status being the highest in revenue generation in the country. Such achievement is expected to generate employment and give room for expedient development for the state and making other positive contribution to the country’s economy at large.

Nevertheless, the start of production brings up certain questions and concerns, especially regarding the management on the return and proceeds from the field; the royalty and tax. This comes as a result of the overstayed large-scale corruption which has eaten deep into the Nigeria system and held the country to ransom over the years.

Lagos state government must as a matter of urgency take precaution of the issue and not necessarily get carried away by the merry of the discovery, especially focusing all their attention on the oil at the detriment of other means of their revenue generation.

Aside the positive impact of oil exploration in the state, the state must learn from the experiences of the Niger Delta region which are still in focus till date, regarding the implication of oil exploration to the environment and the inhabitants. It is no longer news that many communities in the Niger Delta battle with a very large amount of environmental degradation and pollution which are effects of the oil exploration activities within the circumference of the area. And this should be a major concern for the Lagos state government, especially the commission of environment.


Lagos is already known for its dense population and over-crowding, which is one of the many reasons for its frequent traffic congestions. The discovery which will definitely attract many investors and “oil tourists” to the field will as well attract more population from other parts of the country to Lagos where many believe “money flows” everywhere.

As a precautionary means,   the government should make sure it settles every community involved or that will be affected as a result  of this exploration so as to avoid the birth of militant groups in Lagos, which could arise as a result of none or improper settlement with the host communities. As it is known, militancy is just one of the symptoms of the deeply rooted problems in the Niger-Delta regions. Hence, the Lagos state government should learn from that and also make provision to ensconce any gas flaring, oil spills, illegal refining, oil theft and kidnapping that could arise following the discovery.

In a way to check the activities of the companies during exploration, government should as a matter of must place a huge penalty with the international standard on any company/firm that does not compensate the host communities which the oil exploration could cause any hazardous challenge to their health and means of livelihood, especially to the farmers and fishermen.

In a quick response to the news that Lagos has joined the league of oil producing states, economic analysts have advised the state government to exercise caution by remaining focus on the strategic sectors that have made the state what it is today and as well learn to avoid the mistakes which gave birth to the incessant challenges confronting the other oil producing states in the country. Therefore, the analysts call upon the state government to continue to utilize and relish the benefits and opportunities inherent in the integral spheres, including maritime, communication and other sectors.



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