Nigeria’s oil and gas industry stands at a critical crossroads. Despite the enactment of the Petroleum Industry Act (PIA) in 2021, which aimed to provide much-needed regulatory certainty and foster operational efficiency, there are mounting calls for amendments even before the Act’s benefits have been fully realised. Such premature policy shifts risk increasing Nigeria’s risk premium, dampening investment, and perpetuating the sector’s longstanding challenges.
This edition of the Oil and Gas Valuechain Magazine presents key insights into emerging issues, present challenges, and ongoing opportunities for good governance in Nigeria’s Oil and Gas Industry (NOGI):
Oil Theft: Stolen barrels represent lost opportunities and denied value for future generations. True success should be measured by the creation and maintenance of shared value, rather than merely reporting production numbers.
NNPCL’s Credibility: Concerns about offshore LNG subsidiaries, overseas offices, and LNG transportation costs highlight trust issues. Pursuing commercial objectives without transparency introduces significant risks.
Dangote Refinery: The shift in fuel import dynamics underscores the impact of deregulation. While monopoly concerns have arisen, these should be addressed through the implementation of competition policy.
NUPRC Reforms: Investor confidence is showing signs of improvement under Gbenga Komolafe’s leadership, demonstrating the PIA’s potential benefits if consistently enforced.
JV Equity Sales and PIA Amendments: Joint Ventures (JVs) provide crucial dividends alongside taxes and royalties. Losing this advantage — without first addressing operational inefficiencies and enforcing fiscal discipline – would undermine Nigeria’s economic foundation.
Maintaining policy consistency, ensuring effective implementation, and upholding robust enforcement practices are vital for achieving the goals set out in the PIA. The long-term development of Nigeria’s petroleum sector should be guided by strategic approaches, not repeated legislative changes. The PIA presents an opportunity to convert petroleum wealth into sustainable development, but this can only be achieved if the Act is implemented faithfully. Continuous amendments risk creating the illusion of progress while deepening investor uncertainty.
Nigeria’s petroleum economy must prioritise future generations over short-term gains. Laws should be implemented and their outcomes assessed before considering reforms. Anything less is motion without progress. Ultimately, it is the quality of governance, not the abundance of natural resources, that will determine whether Nigeria’s oil and gas wealth becomes a blessing or remains a curse.
Introduction
Nigeria’s oil and gas sector is marked by a contrast between its abundant natural resources and persistent challenges, including fiscal instability, shifting policy environments, and entrenched rent-seeking behaviours. The Petroleum Industry Act (PIA), passed in 2021, was a landmark effort to strengthen regulatory certainty, improve operational efficiency, and boost international competitiveness. However, proposed amendments emerging less than four years after its implementation threaten to undermine the Act before its intended benefits can be fully realised. Ongoing debates, covering issues such as oil theft, NNPC Limited’s transparency, the Dangote refinery’s market position, and ongoing regulatory adjustments, highlight the persistent governance issues in Nigeria’s petroleum industry.
PIA Amendments: Don’t Trade Governance for Expediency
In the realm of petroleum economics, natural resources only translate into value when governance converts geology into a predictable cash flow. The PIA was designed to address this by establishing clear roles, modern fiscal frameworks, and credible oversight to attract risk capital. Proposals to amend Section 8 to allow the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to act as concessionaire threaten to undermine these gains, making Nigeria appear riskier and less attractive to investors.
Experience shows that capital is mobile, while geology is fixed. Between 2015 and 2019, billions of dollars flowed into Africa’s upstream oil sector, but Nigeria lagged due to regulatory uncertainty. The PIA began to address this, with projects like Bonga North moving forward thanks to renewed investor confidence in Nigeria’s commitment to transparent cost recovery, stable terms, and impartial oversight. If regulators become participants, trust and fairness are eroded, and investment risk rises.
Risk allocation is central to oil project economics. Under Production Sharing Contracts (PSCs), investors bear exploration and development risks, financing activities upfront, and only recover costs if oil is produced. The government avoids upfront expenses and earns through royalties, taxes, and profit from oil, but only if credibility and contract discipline are maintained. That is why the PIA separated policy (Ministry), regulation (NUPRC/NMDPRA), and commercial functions (NNPC Ltd). The proposed amendment collapses these distinctions, replacing transparency with potential conflicts of interest.
The economic hinge of PSCs is cost recovery, which depends on independent verification. If the regulator approving costs also benefits from those approvals, neutrality is lost. This leads to increased disputes, arbitration risks, and higher investor hurdle rates—ultimately delaying or derailing Final Investment Decisions (FIDs).
Nigeria’s fiscal stability remains heavily reliant on oil revenues. Weakening the PIA could exacerbate production declines and foreign exchange fragility, making the economic situation more precarious. Arguments that the amendment streamlines government roles overlook the importance of role clarity for market efficiency. When regulators also act as commercial players, perceptions of fairness collapse, and risk premiums rise — not because the resource changed, but because the rules did.
Nigeria competes globally for upstream investment. While other regions offer stability, this amendment signals uncertainty. To grow production, revenues, and jobs, Nigeria should implement the PIA with discipline, enforce contracts, and maintain clear separations between policy, regulation, and commercial activity. The PIA’s true promise lies in institutional predictability, which lowers transaction costs, reduces regulatory risk, and enhances Nigeria’s standing among investors. Undoing this progress would be a step backwards.
In summary, governance—not geology—determines investability. The PIA provided Nigeria with a credible operational framework. Rewriting Section 8 to merge the regulator and concessionaire would increase capital costs, delay investment, and erode fiscal benefits. To achieve growth, Nigeria must preserve the separation of roles established in the PIA, maintain impartial regulation, and execute policies consistently.
Oil Theft in Nigeria: Economic Implications and Governance Reform
Nigeria has achieved a remarkable reduction in crude oil theft, dropping from around 102,900 barrels per day in 2021 to 9,600 barrels per day by July 2025—a 94% improvement. This progress has strengthened fiscal stability, improved investor confidence, and enhanced environmental outcomes for oil-producing communities. Sustained success depends on governance reforms, transparency, and active community involvement.
The economic gains from reduced oil theft have enabled Nigeria to recover lost revenues, decrease borrowing, stabilise foreign exchange inflows, and lower costs related to pipeline repairs and environmental remediation.
Communities in the Niger Delta have benefited from fewer oil spills and improved welfare.
Investor confidence has risen as lower theft rates reduce project risks, improve net present values, and support more reliable production forecasts. Still, investors call for consistent policies, especially regarding oversight of contracts between NNPC Ltd. and NUPRC.
Recommended reforms include full implementation of the PIA to separate policy, regulation, and operations; enforcing transparency through independent audits; strengthening host community development trusts; investing in advanced monitoring; and committing to long-term benefits.
NNPC Limited: Commercialisation or Rent-Seeking?
NNPC Limited is increasingly seen as a liability rather than a reliable source of stable revenue for the nation. Initially envisioned as a champion of value creation, NNPC Limited has fallen into patterns of inefficiency, lack of transparency, and politicization. This is symptomatic of a broader rent-seeking and rent-sharing culture entrenched in Nigeria’s political economy, where oil wealth is distributed rather than used to drive sustainable development.This situation is particularly tragic given Nigeria’s vast petroleum resources. Natural wealth should foster productivity, innovation, and intergenerational equity, but instead, it has bred dependency and stifled creativity. Prosperity is now measured by rent distribution instead of value creation. The future depends on choices regarding governance, resource stewardship, and prioritising long-term benefits over short-term gains.
Deregulation, Dangote, and the Downstream Market Structure in Nigeria
The commissioning of the Dangote Refinery has significantly disrupted Nigeria’s downstream sector. For the first time in years, the dominance of fuel imports has been broken. While concerns of monopoly have arisen, a true monopoly only occurs when a player eliminates competition by absorbing rivals or restricting market entry. Dangote has not done this; rather, importation has become uneconomic in the deregulated market.
The main issue lies not with Dangote’s dominance but with Nigeria’s weak competition policies. Rather than amending the PIA to restrict Dangote, regulatory frameworks should be strengthened to ensure fair competition. Deregulation aligns with the PIA’s goal of liberalising the sector—reducing subsidies, improving efficiency, and attracting investment. The Dangote Refinery exemplifies the positive outcomes of policy consistency.
Vertical integration—combining refining, transportation, and retail—can enhance efficiency and lower costs, potentially resulting in lower pump prices for consumers. However, efficiency must benefit the wider public, not just dominant players. Concerns remain about social impacts such as traffic congestion, safety, and the marginalization of smaller marketers. Effective regulation is therefore critical to ensure fair access, competition, and public safety. The success of these developments should be judged by consumer benefits, not merely economic expediency.
Regulations Done Right: Is the Petroleum Commission (NUPRC) Exemplary?
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), under Chief Executive Gbenga Komolafe, has made significant progress in implementing the PIA and restoring investor confidence. Clarity and predictability in regulation are drawing renewed interest from international oil companies and global financial institutions.
However, lasting regulatory credibility requires strict alignment with the PIA’s governance structures, including the establishment of a properly constituted Board. Regulatory consistency should be institutionalised and not reliant on individuals, ensuring resilience through political transitions. The PIA’s intent is to separate policy, regulatory, and commercial functions to promote transparency and accountability. Operating without statutory checks, such as a Board, undermines these goals.
Sustained investor confidence depends on both immediate reforms and the durability of governance frameworks. Strict adherence to the PIA is essential to maintain progress and position Nigeria as a reliable investment destination. The draft 2023 Petroleum Development Contracts Regulations propose that title to oil and gas licenses rest with the Commission, ensuring direct revenue flow into the Federation account and reducing NNPC Ltd.’s direct control. This transition, though challenging, is necessary to eliminate conflicts of interest and enhance accountability.
Rethinking JV Equity Sales: Do the Numbers Matter or Is It a Nationalistic Agenda?
Nigeria is at a turning point regarding the possible sale of Federation equity in upstream Joint Ventures (JVs) and further amendments to the PIA. These choices carry major implications for national revenue, sovereignty, and the investment climate. Reducing Federation stakes from 55-60% to 25-35% would decrease direct dividend income and weaken government authority over operations, with the risk of mismanagement if assets are sold to unqualified buyers.
On the other hand, equity sales could alleviate cash call burdens and bureaucratic delays faced by NNPC Limited, potentially freeing up resources for debt reduction or infrastructure investment. However, it is crucial to recognise that JVs provide dividends in addition to royalties and taxes, making up about a third of total revenue. By contrast, Production Sharing Contracts (PSCs) provide only taxes and royalties, so equity sales could shrink Nigeria’s fiscal base. Rapid amendments to the PIA could also undermine policy stability and investor confidence, deterring long-term investments if perceived as serving narrow interests.
Summary and Concluding Remarks
Nigeria’s oil and gas industry is navigating a period of major challenges and opportunities, especially with proposed amendments to the Petroleum Industry Act (PIA) of 2021. Consistent policy and robust governance are essential to unlock the sector’s potential for sustainable development and to strengthen investor confidence.
The proposed amendments to the PIA, particularly allowing the NUPRC to function as a concessionaire, threaten regulatory neutrality and could raise investment risks and undermine fiscal stability. The current separation of policy, regulation, and commercial roles remains crucial for attracting capital. Nigeria has made notable progress in reducing oil theft by 94% since 2021, which has improved fiscal stability, investor confidence, and environmental conditions in oil-producing regions. Continued progress depends on governance reforms, transparency, and community engagement.
NNPC Limited faces significant operational challenges, including inefficiency and rent-seeking behaviours, which have transformed it from a value-creating enterprise into a liability. This situation reflects broader governance and political-economic issues. The Dangote Refinery has disrupted the downstream market, reducing reliance on imports. However, concerns about monopoly highlight the need for strong competition policies rather than focusing on market dominance. Effective regulation is necessary to ensure competition and consumer benefits.
Under Gbenga Komolafe’s leadership, the NUPRC has advanced regulatory clarity and attracted investment, but full compliance with PIA governance structures, including a properly constituted Board, is essential for maintaining credibility. Selling Federation equity in upstream JVs poses risks of diminishing government dividends and sovereignty, which could narrow Nigeria’s fiscal base relative to PSCs. Such sales require careful management and qualified buyers. Premature amendments to the PIA could undermine investor confidence and hinder long-term investment, particularly if seen as benefiting select interests. Stable and consistent policy implementation is critical.
In conclusion, the macroeconomic importance of sound policy in Nigeria’s oil sector cannot be overstated. The sector’s future depends on fiscal discipline, policy stability, and faithful law execution to translate petroleum resources into sustainable development. Ultimately, governance will determine whether Nigeria’s oil and gas wealth is a blessing or remains a curse.
OMOWUMI O. ILEDARE, PhD,
Sr. Fellow USAEE, Fellow NIPetE,
Fellow EI, Professor Emeritus,
Louisiana State University, Baton
Rouge, USA & Executive Director,
Emmanuel Egbogah Foundation,
Abuja, Nigeria.