
By Gideon Osaka
The oil and gas sector under President Bola Ahmed Tinubu’s administration, is experiencing a resurgence even though challenges still lie ahead. At the inception of his administration, the President embarked on a bold journey to reform the sector with the signing of executive orders to fast-track regulatory approvals, reduce operational costs and introduce competitive fiscal incentives. These reforms, aimed at attracting foreign direct investment (FDI), and positioning Nigeria as a competitive player in the global energy market, have been implemented in almost two years of the administration.
One of the cornerstones of Tinubu’s oil sector reforms is the accelerated implementation of the Petroleum Industry Act (PIA), a landmark legislation aimed at restructuring the oil and gas sector. Signed into law in 2021, the PIA seeks to modernise the regulatory framework, attract investments, and ensure fair revenue sharing among stakeholders. Under Tinubu’s leadership, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) have intensified efforts to enforce compliance and streamline operations. These efforts have resulted in improved investor confidence. International oil companies (IOCs) and indigenous players are increasingly committing to new exploration and production projects, buoyed by clearer guidelines and incentives outlined in the PIA.
Valuechain reports that Foreign Direct Investments (FDIs) into Nigeria rose by 248 per cent in the third quarter of 2024 to $103.82 million. Although the inflows were too low to engender the growth needed to turn around the investment-starved economy, the improvement in FDI is attributed to the reforms implemented in the energy sector, which have since paved the way for more investments.
Experts say the growth in FDI demonstrates investor confidence noting that the rise means investors are beginning to see changes in the Nigerian economy.
According to the president of the Nigerian Economic Society (NES) Adeola Adenikinju in a media interview, the relative peace the oil-rich Niger Delta is witnessing, together with the full liberalisation of the oil sector, would likely lure more investors and may lead to a sustained growth in direct investment.
“I expect that more investment will flow towards gas, to the refinery sector. So, that sector is likely to be very bullish in the future, very likely to grow,” the economics professor said.
According to a recent report by market intelligence firm, Wood Mackenzie, Nigeria ranked as Africa’s leading destination for upstream oil and gas investment in 2024. The country accounted for three, out of four Final Investment Decisions (FIDs) announced by global oil and gas majors, totalling $13.5 billion.
According to the report, the FIDs announced within the Nigerian market included Shell’s $122 million investment in the Iseni Gas Project, TotalEnergies’ $566 million commitment to the Ubeta Gas Project and Shell’s approval of the Bonga North Tranche 1 project.
Early last year, TotalEnergies pledged around $500 million to a joint venture with the Nigerian National Petroleum Company (NNPC) Limited to develop the Ubeta onshore field. With an expected output of 300 million cubic feet per day, this project is set to strengthen gas supply to the Nigerian Liquefied Natural Gas (NLNG) plant.
Shell and its partners recently pledged a $5 billion investment in the nation’s oil sector. The investment which is on the Bonga North Deep Offshore Field, is expected to yield approximately 350 million barrels of crude oil. Shell has also pledged more than $3 billion mainly directed at expanding LNG production, renewable energy projects, and infrastructure development within Nigeria’s energy sector.
Similarly, ExxonMobil, during a meeting with Vice President Kashim Shettima in New York, revealed plans to invest $10 billion in Nigeria’s deep waters to increase the nation’s crude oil output.
Alternative Petroleum & Power Ltd (APPL) is also developing the Hydrogen Polis project to produce green hydrogen derivatives like green methanol and ammonia in Akwa Ibom State. The project includes 1,650 MW of renewable energy and will create 25,000 direct and indirect jobs.
The African Energy Chamber (AEC), the voice of the African energy sector, while acknowledging these feats commended the Nigerian government for its proactive legislation aimed at attracting foreign investments, streamlining project implementation and reducing bottlenecks.
It noted that in 2024, Nigeria introduced several initiatives to create a conducive environment for oil and gas investors, including new tax incentives aimed at attracting up to $10 billion in natural gas investments – offering tax relief for gas investors, reducing corporate income tax and extending capital allowance benefits – for deepwater gas projects.
“In addition to the directives, Nigeria also launched its 2024 oil and gas licensing round, offering 19 blocks for exploration, demonstrating its commitment to continued collaboration with local, regional and international partners. With this momentum, further FIDs are anticipated, including TotalEnergies’ expected $750 million commitment to the Ima Shallow Gas Project in 2025.”
According to the AEC, these investments reflect Nigeria’s ongoing efforts to unlock its hydrocarbon potential through investor-friendly policies and strategic global partnerships. They also signal renewed confidence in Nigeria’s energy sector and demonstrate the effectiveness of the administration’s strategic focus on engendering a robust and competitive investment climate.
Despite these positive developments, challenges remain. Investment inflows into the country are still too low to engender the growth needed to turn around the economy. According to the National Bureau of Statistics, the oil and gas sector attracted a meagre $5 million (representing 0.2 per cent of the total inflows) in 2024 Q2 and no foreign investments in 2024 Q1 suggest the country’s upstream assets are becoming less competitive globally.
To put it in proper perspective, FDIs in the sector continue to dim substantially as investor attention is increasingly drawn to new and emerging developments. Big foreign players, including TotalEnergies and Shell, are shifting their priorities in Nigeria, rattled by a variety of forces: an uninviting regulatory environment, lack of transparency, safety issues, vandalism, and theft, among other factors.
Countries like Ivory Coast, Namibia, the Republic of Congo, and Angola are drawing investors’ attention away from Nigeria.
Shell is pursuing deepwater blocks in Ivory Coast for exploration, while large Italian firm Eni has just added offshore Block CI-205 to its vast Murene Bailene discovery of 2021. All of these are happening while Ivory Coast is successfully emphasising carbon-reducing technologies and natural gas as a transition fuel.
Overseas investment has also spurred significant recent discoveries in Namibia, earning the country the nickname, “New Guyana.” Notable among recent Namibian discoveries is TotalEnergies’ Venus Discovery, for which the French major is seeking approval to move ahead by the close of 2025.
TotalEnergies is also looking to invest $600 million in exploration and production in the Republic of Congo’s Moho Nord deep offshore field this year.
Angola, too, has become a major investment site for TotalEnergies. The firm’s CEO said it will invest $6 billion in energy in Angola, as “a country with a more stable policy framework.”
While challenges persist in Nigeria, the ongoing reforms have set a solid foundation for a more sustainable and prosperous oil and gas sector.