
By Gideon Osaka
The energy sector driven largely by oil and gas activities remains Nigeria’s economy’s cornerstone, contributing significantly to government revenue and foreign exchange earnings. Despite the impacts of currency devaluation and foreign exchange fluctuations on the economy since the inauguration of the current administration, the sector nevertheless remained active and resilient last year, with a flurry of activities. Notable developments like the operationalisation of the Dangote refinery and resumption of commercial production at the Port-Harcourt refinery, completion of certain oil and gas assets, divestments by international oil companies (IOCs), construction and commissioning of critical oil and gas infrastructure projects and the issuance of series of executive instruments including executive orders and presidential directives, amongst others, were witnessed.
Whilst 2024 was indeed a momentous year, 2025 is expected to witness an increase in the spate of activities as the country works towards promoting energy independence and reliability, ensuring energy security, and simultaneously pursuing its energy transition plans. Several critical events and developments are expected to define the sector’s trajectory going forward.
In the following analysis which is based on forecasts by petroleum economists, key stakeholder groups, energy market and policy experts, Valuechain shares its perspectives and outlook for the energy sector in 2025.
New oil licensing round
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) last year, announced the commencement of a petroleum licensing round for 12 new blocks. The technical and commercial bid submission stage has since closed while evaluation of the technical bids, ministerial approval of awardees, contract negotiation/signing and the eventual award of licences to qualified awardees are expected.
Barring any timeline extension, the Bid Round is expected to be completed by the first quarter of 2025 and commercial operations on the newly awarded fields should commence on or before the end of 2025.
The Bid Round undoubtedly represents a pivotal opportunity for new investment in the oil and gas industry, with a clear roadmap designed to attract both local and international players. Given NUPRC’s positive posture, it is expected that the strict timeline will be adhered to, and the Bid Round should ideally be concluded in Q1 2025. This expectation is however contingent on the level and extent of interest and positive participation received from existing International Oil Companies (IOCs), indigenous companies and potential new entrants in respect of the Bid Round.
Boost in gas utilisation, increased CNG adoption
A lot of significant developments took place in 2024 concerning the country’s transition to natural gas as an alternative energy source. One of the most significant shifts anticipated in 2025 is the broader adoption of Compressed Natural Gas (CNG) as an alternative to petrol and diesel. The federal government has so far made significant strides in the adoption of CNG as an alternative to petrol, with some CNG-backed initiatives spearheaded by the Presidential Compressed Natural Gas Initiative (PCNGi). This year, a lot more is expected to be witnessed as these initiatives and incentives by the government for CNG infrastructure development and adoption, mature. There is a likelihood that more vehicles will convert to CNG, solar power, or electric energy sources.
Following the removal of fuel subsidies in 2023, the Nigerian government intensified efforts to promote CNG as a cheaper and cleaner fuel option. By 2025, it is expected that more vehicles, particularly in urban centres, will run on CNG, driven by government incentives, private sector investments, and the establishment of CNG refuelling stations nationwide. This transition could alleviate the economic burden of high fuel prices on Nigerians and reduce greenhouse gas emissions.
The Decade of Gas initiative, launched in 2021, is expected to reach a critical milestone in 2025. With Nigeria holding one of the largest natural gas reserves in Africa, the government has prioritised the development of gas infrastructure to support domestic consumption. By 2025, more households and industries are expected to transition to gas for cooking and power generation as well as transportation. With the government prioritising gas as a transition fuel, significant investments in gas infrastructure are anticipated. Projects such as the Ajaokuta-Kaduna-Kano (AKK) pipeline and the Nigeria-Morocco Gas Pipeline are expected to advance towards completion.
Boom in domestic refining
One key area where a lot of activities will be happening is the domestic refining subsector as more refineries come on stream to add to those that are already under construction or expected to reach full capacity.
The ongoing construction of the greenfield 200,000 bpd refinery and petrochemical plant by BUA Group situated in Akwa Ibom State is expected to be completed in 2025.
The NMDPRA last September granted an additional 5,000 barrels per day licence to Waltersmith refinery located in Ibigwe, Imo State. The refinery is expected to be commissioned by Q3 2025, with plans to expand to Phase 3 immediately after. The modular refinery with a 5,000 barrels per day production capacity achieved under the Phase 1 development, has been undergoing expansions to 10,000bpd with a target to further ramp up the capacity to 40,000bpd in the shortest possible time.
The Dangote refinery, which is said to be operating at 85% capacity plans to reach full capacity this year and once fully operational, most gasoline from the plant is expected to be retained for domestic markets thereby contributing to the country’s goal of petrol importation reduction while the majority of diesel and jet fuel are likely to be exported.
The positive effect of this development is the effective shielding of the local petrol markets from the direct impact of the local currency devaluation and unstable foreign exchange market. However, the steady supply of crude oil feedstock from the NNPC Ltd to the Dangote Refinery will be crucial in determining the refinery’s impact on the economy in 2025.
Similarly, the PH Refinery which is now up and running as of Q4 2024, although not yet operational at its full capacity (currently operating at 70 per cent of its total installed capacity) there are positive expectations and plans to ramp up its operations to about 90% in 2025.
Undoubtedly, these refineries will be a game changer in Nigeria’s quest for a robust local refining market and, a fully functional and self-sufficient domestic energy sector with little or no dependence on fuel importation. Output from these refineries is anticipated to reduce the country’s dependence on imported petroleum products, saving billions in foreign exchange and creating thousands of jobs.
Expansion of renewable energy projects
Nigeria’s renewable energy sector is set to gain momentum in 2025, with solar power leading the charge. The federal government, in collaboration with international partners, has been investing heavily in solar mini-grids to electrify rural and underserved communities. By 2025, these efforts could significantly increase electricity access, reducing the country’s reliance on diesel generators and improving the quality of life for millions. Additionally, wind and hydropower projects may see incremental progress, contributing to a more diversified energy mix.
Amidst the perennial call for a shift in energy sources and diversification of Nigeria’s Energy mix, the Renewable Energy Sector in Nigeria, though nascent, will continue to grow in a positive response to the energy transition efforts and Nigeria’s Energy Transition Plan.
Given Nigeria’s abundant green energy sources, such as solar, wind, hydro, and bioenergy, coupled with the ever-evolving favourable government policy framework, technological advancements, and improving project economics, it is projected that the sector will continue to experience significant growth over the coming years.
Critical projects and developments which may define the sector in 2025 include the 300KWp Power Project in Kainji inaugurated last year. The project is equipped with a cutting-edge Battery Energy Storage System and integrated with the Kainji Hydro Power Plant, to enhance electricity accessibility, reliability, and affordability for businesses and households alike. Another project is the Renewable Energy Technology Manufacturing Zone, located within the Evergreen City. It is dedicated to the local production of critical renewable energy technologies, including solar panels, wind turbines, energy storage systems, and other clean energy components. This initiative is a strategic response to Nigeria’s growing energy demand and commitment to diversifying energy sources while reducing reliance on fossil fuels.
Continued divestment by IOCs
Given the current divestment wave experienced in the oil and gas industry, there is strong potential for more divestments by way of the sale of IOC’s onshore oil assets to indigenous oil companies that demonstrate both technical and commercial competence to operate and manage these assets (as required by NUPRC’s regulatory regime). Additionally, it is also envisaged that more indigenous companies will increasingly form joint ventures, consortiums, partnerships or alliances in connection with these acquisitions, which said alliances or partnerships will allow them to combine financial resources and technical expertise in respect of the ownership, operation and management of these assets. For transactions already completed but awaiting regulatory approvals, there is the likelihood that the regulators will grant the necessary consents, approvals and authorisations as a matter of course where the parties have complied with the necessary consent or assignment requirements.
The rise of indigenous oil and gas companies is expected to shape the sector in 2025. These companies, buoyed by supportive policies and access to divested fields, are likely to play a more prominent role in exploration and production activities. Their success could contribute to local capacity building and reduce the dominance of IOCs.
Power sector reforms and emerging risks
Despite the litany of issues that faced the power sector in 2024, more particularly, the incessancy of grid collapse, review of and subsequent increase in the electricity tariffs for customers within certain bands and frequent blackouts, there was nevertheless a flurry of positive activities and developments signalling promising signs and prospects in the overall development of the sector.
Pertinently, the sector saw the emergence of the much-anticipated regulatory transfer and transition from the NERC to the state-owned regulatory commissions in some states following the Electricity Act 2023. Whilst there has been ongoing conversation about the benefits and potential impact of these regulatory changes, this regulatory reform undeniably empowers the states to regulate investments in their electricity markets, fostering competitive energy policies aimed at attracting investors and boosting regional development. However, the impact of this restructuring on existing contractual and financial obligations remains uncertain.
Coupled with these key developments are also the enactment of key electricity legislation by certain states and the issuance by NERC of several statutory regulations and orders, with the potential to define the direction, state and status of the power sector in 2025 and beyond.
Given the frequency of grid failures, outages and blackouts, a heightened emphasis on the improvement, rehabilitation and refurbishment of the current dilapidated electricity transmission and distribution infrastructure in Nigeria, is anticipated. Energy experts note that 2025 will witness a repeat of grid failures due to poor mitigation measures engaged to tackle inherent weaknesses.
… Continuity in regulatory transfer to state regulatory commissions
In continued compliance with, and realisation of the provisions of the EA, more states in Nigeria are expected to set up their own respective electricity regime(s) by complying with the requirements of the Act, enacting their electricity legislations and establishing their respective electricity regulatory commissions.
African Energy Bank full-scale take-off
Structured as a Pan-African energy development bank, the African Energy Bank (AEB) is a partnership among the African Petroleum Producers’ Organization (APPO), African Energy Investment Corporation (AEICORP), and African Export-Import Bank (Afrexim Bank) to close the energy deficit in Africa.
Officially launched on June 3, 2024, in Cairo, Egypt, the announcement of the full take-off of the bank was solidified later on July 4, 2024, with the decision to site the bank’s headquarters in Nigeria with the first quarter of 2025 set as the deadline for the operationalisation. With the expected full operationalisation of the bank, there is a high expectation about how the institution is poised to strengthen Africa’s energy autonomy with an initial capital base of $5 billion contributed by African stakeholders, including Nigeria, which has pledged $10 million as seed capital.
Structured as an independent, supranational entity, the bank is a significant step towards enhancing Africa’s energy security and development. The outlook for Nigeria’s oil and gas sector in 2025 is a mix of opportunities and challenges. While global energy transitions and domestic reforms present a chance to diversify and modernize the sector, persistent issues such as production inefficiencies and environmental concerns require urgent attention. With strategic planning, robust policy implementation, and collaboration among stakeholders, Nigeria can maximise the potential of its oil and gas resources while laying the groundwork for a sustainable energy future.
With potential positive developments in the upstream, midstream and downstream segments and in the power sector and renewable energy, the journey will not be without hurdles, and addressing these challenges will require strong political will, strategic investments, and the active participation of all stakeholders.