Preamble
The global energy ecosystem is experiencing unprecedented turbulence—marked by supply disruptions, decarbonisation pressures, geopolitical frictions, and technological disruption. In this volatile setting, Nigeria’s oil and gas economy, once considered its economic bedrock, is confronting a new set of existential challenges. From declining crude output and fiscal instability to stalled sectoral reforms and institutional inertia, the fault lines are widening.
At the centre of Nigeria’s response to these issues is the Petroleum Industry Act (PIA) 2021, arguably the most comprehensive overhaul of the sector’s legal and regulatory framework in decades. Passed after nearly two decades of legislative bottlenecks, the PIA was heralded as a governance renaissance—a modern petroleum law tailored to attract investment, ensure value creation, and deliver energy security. However, more than three years after its enactment, the law’s implementation has proven slow, uneven, and increasingly vulnerable to political whims. Currently, the Petroleum Commission and the Petroleum Authority do not have Boards of Directors in place. Additionally, the Ministry of Petroleum Resources, which serves as the policy institution under the PIA, appears to remain on the periphery and is not actively involved.
This op-ed offers a critical assessment of the current state of Nigeria’s oil and gas economy in the context of global energy volatility and the PIA era. It interrogates governance lapses, evaluates missed opportunities, and proposes imperatives for repositioning the sector for long-term sustainability. Further, the op-ed reflects on the converging pressures from the international energy landscape and Nigeria’s internal reform dynamics, drawing insights from engagements and observations over time. It argues that Nigeria must urgently harmonise its governance reforms with strategic foresight to remain relevant and competitive in a decarbonising world.
The Global Energy Backdrop: Volatility as the New Normal
The world is in flux. The ongoing Russia-Ukraine war, coupled with post-COVID recovery challenges, has reshaped global energy demand and supply dynamics. While oil prices have fluctuated above the $70–$90 per barrel range, production quotas by OPEC+, strategic petroleum reserve releases by the U.S., and Europe’s desperate gas diversification efforts have created short-term market imbalances.
Longer-term structural shifts are even more consequential. The energy transition continues to gather momentum. Climate policies are becoming stricter. Renewable energy investments are rising. And global financiers are becoming more ESG-sensitive. Nigeria finds itself at a crossroads. Still heavily reliant on oil exports for over 85% of foreign exchange earnings and about half of government revenues, the country remains dangerously exposed to global oil shocks. At the same time, it lacks the internal capacity and institutional alignment to pivot quickly towards energy transition gains, especially in gas.
PIA: A Structural Win, but a Governance Test
Nigeria’s petroleum economy stands at a critical juncture. The global energy landscape is rapidly evolving, driven by decarbonization pressures, energy security concerns, and shifting investment priorities. At home, the Petroleum Industry Act (PIA) promises to reshape institutional governance, fiscal terms, and regulatory frameworks. Yet, implementation hurdles, policy inertia, and macroeconomic volatility threaten to blunt its transformative potential.
The PIA was designed to resolve long-standing inefficiencies in the sector. It unbundled the Nigerian National Petroleum Corporation (NNPC) into a commercially driven limited liability company—NNPC Limited—expected to operate without recourse to the treasury. It created two new regulators: the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). It also promised clarity in host community obligations and introduced a fiscal regime that is more competitive globally.
Yet, reform success depends less on the quality of the law and more on the integrity of its implementation. This is where Nigeria continues to falter. Regulatory overlaps, political interference, and capacity gaps have weakened the law’s full delivery. The downstream deregulation, for instance, remains muddled with partial subsidy regimes and opaque pricing mechanisms. Meanwhile, the upstream sector continues to struggle with production declines, investment flight, and rising cost profile issues that the PIA was meant to address. Moreover, NNPC Limited, though incorporated, still operates in a space clouded by executive discretion and limited public accountability. The question remains: can it truly function as a profit-driven, transparent national oil company when its governance framework remains subject to state control?
The Gas Conundrum: Missed Chances in a Golden Moment
Global consensus views natural gas as the ideal transition fuel—less polluting than coal or oil and useful for both baseload electricity and industrial applications. Nigeria, blessed with over 200 trillion cubic feet (TCF) of proven gas reserves, should be a continental gas powerhouse. Sadly, the country has underutilised this resource. The PIA provides a foundation for a viable midstream sector, with incentives for gas development, transportation, and commercialisation. But execution has lagged. Critical infrastructure, such as pipelines, processing plants, and storage systems, remains underdeveloped. Regulatory uncertainties continue to frustrate private investors. And the market itself—fragmented, underpriced, and distorted by subsidy legacies—offers limited commercial viability.
The Decade of Gas initiative, while conceptually sound, has struggled to gain traction. Without strong public-private partnerships, regional cooperation (especially under the West African Gas Pipeline and Trans-Saharan Gas initiatives), and enforceable market rules, Nigeria risks being left behind in the global gas race.
Refineries, Rent-Seeking, and the Illusion of Turnaround
One of the most politically charged elements of Nigeria’s petroleum landscape remains its moribund refineries. Billions of dollars spent on so-called Turnaround Maintenance (TAM) have yielded no sustainable results. Recently, probes by the National Assembly into these failed projects have resurfaced. While oversight is welcome, past probes have shown little capacity for accountability or course correction.
Thus, the National Assembly’s renewed probe into the failed turnaround maintenance (TAM) of Nigeria’s four refineries raises doubts, given the country’s history of fruitless investigations in the oil sector. Far too often, past probes into refinery rehabilitation efforts have amounted to little more than political theatre, yielding neither accountability nor reform. Unless this current exercise is designed with clear objectives, transparency, and follow-through mechanisms, it risks becoming yet another unproductive cycle—offering headlines without hope and motion without meaningful progress.
Meanwhile, hope has shifted to the Dangote Refinery, Africa’s largest single-train facility. Its potential is massive: reduced import dependency, improved foreign exchange conservation, and creation of a downstream value chain. However, concentration risk, market distortion potential, and regulatory capture fears remain if a single entity dominates the sector. To truly liberalise the downstream sector, Nigeria must incentivise modular refineries, encourage competition, and create a pricing and logistics ecosystem that rewards efficiency over political connections.
That Nigeria’s downstream petroleum market is anti-competitive is no longer a matter of conjecture. However, the idea that issuing more import licenses will automatically promote competition is debatable—and may not be the most effective solution. Even for the Dangote Refinery, pursuing aggressive market dominance does not guarantee optimal profit margins.
The Cost Efficiency Order: Sound Intentions, Uncertain Impact
In May 2025, the President issued an Executive Order on Cost Efficiency within Nigeria’s Oil and Gas Sector, aiming to address cost overruns and promote profitability. The order introduces standardised cost templates and emphasises greater local content participation. Its objectives include resolving persistent inefficiencies and curbing fiscal waste in the petroleum industry. Designed to complement the Petroleum Industry Act (PIA), the directive specifically addresses inflated project costs, redundant agency functions, and rent-seeking practices that diminish value creation. With effective implementation, it has the potential to significantly reduce fiscal leakages, bolster investor confidence, and reinforce regulatory integrity.
Nonetheless, the order faces considerable obstacles, such as institutional resistance, weak enforcement mechanisms, and transparency deficits. Realising its transformative ambitions will require clear delineation of agency roles, public disclosure of costs, and the establishment of credible oversight frameworks. Ultimately, Nigeria’s capacity to move from rhetoric to substantive reform will determine whether this executive order reaffirms previous commitments or establishes a new benchmark for governance in the oil and gas sector. While the initiative is commendable, the core challenge extends beyond cost inflation to encompass issues of regulatory oversight and benchmarking discipline. Without empowering regulators to enforce fiscal responsibility—and ensuring their independence, the executive order risks becoming yet another well-intentioned policy lost amidst ineffective implementations.
Institutional Reform Must Precede Industrial Revival
Nigeria’s biggest challenge is not the lack of natural resources but the institutional incapacity to steward those resources wisely. The true spirit of the PIA was to de-emphasise discretion and prioritise rules-based governance. This requires:
• Meritocratic leadership in regulatory agencies, insulated from political turnover.
• Transparent licensing and bidding processes, devoid of favouritism.
• Fiscal stability clauses that protect long-term investments.
• Operational independence for NNPC Limited, with legislative oversight and public reporting.
Countries like Norway, Brazil, and even Angola have demonstrated that with strong institutions, resource wealth can become a blessing. Nigeria can still course-correct—but it must begin by making governance reform a non-negotiable national priority.
Policy Recommendations: A Roadmap for Stability and Growth
- Recommit to Full Deregulation: Remove all lingering subsidies, adopt a market-reflective pricing system, and protect vulnerable groups through direct transfers, not distortions.
- Operationalise a National Gas Strategy: Move from slogans to action by implementing infrastructure plans, regional gas trading platforms, and domestic demand stimulation.
- Empower Regulatory Institutions: Fund, professionalise, and insulate the NUPRC and NMDPRA from executive capture.
- Enhance Public-Private Partnerships: Use blended financing and risk-sharing models to crowd in private capital, especially in midstream and refining projects.
- Institutionalise PIA Monitoring: Establish a multi-stakeholder PIA implementation review council comprising civil society, academia, industry, and government.
- Invest in Capacity Building: Reform petroleum education and retrain regulators and policymakers to understand market dynamics in a decarbonising world.
Conclusion: Governance Is the Game-Changer
Nigeria is approaching a pivotal period that may lead to either continued challenges or significant progress, largely depending on governance practices. The Petroleum Industry Act (PIA) represents important legislative development, with its impact determined by the effectiveness of its implementation. It is crucial for Nigeria to prioritise institutional integrity alongside natural resource management to achieve long-term economic stability. As global volatility increases, resilience, supported by sound governance, can serve as Nigeria’s strategic advantage.
Prompt action is required to address Nigeria’s energy sector issues, with particular attention to governance structures. The PIA outlines distinct roles for policymaking, regulation, and operations within the energy sector. However, challenges such as political involvement, subsidy structures, and institutional limitations remain. Establishing regulatory integrity and consistent enforcement is necessary for reforms to succeed, particularly as the global energy landscape evolves.
To strengthen Nigeria’s position in the current energy environment, six key priorities are identified:
• Implement the PIA comprehensively, focusing on both policy and practice.
• Enhance institutional capacity to ensure regulators are empowered, professional, and independent.
• Improve fiscal governance by addressing leakages, refining oversight, and increasing transparency.
• Build investor confidence through clear, consistent, and reliable regulation.
• Develop the gas sector with investment in infrastructure, incentives, and local market support.
• Align national energy strategy proactively with global trends.
The 2025 Annual NAEE/IAEE International Conference is scheduled for October 12 to 14, 2025, at the PTDF Conference Centre in Abuja, Nigeria. The conference will explore how the emerging international energy trends intersect with Nigeria’s ongoing domestic reforms, drawing on recent experiences and developments. Topics include integrating governance initiatives with strategic planning, particularly considering global decarbonization goals.
Sessions will examine the implications of global energy transitions for the Global South, addressing challenges such as institutional capacity and technological readiness, as well as opportunities related to increased energy access and green investment. Representatives from organisations including the Petroleum Commission, Petroleum Authority, NNPC Limited, African Development Bank, academia, and the World Bank have been invited to participate.
Given the current state of Nigeria’s petroleum sector, a roundtable session will discuss the impacts of global decarbonization efforts and the implementation of the PIA. This session will focus on governance, policy frameworks, and strategic decision-making needed to support resilience and maintain investor confidence in changing energy markets. Experts and local officials will contribute to these discussions.
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.
Email:wumi.iledare@iaee.org