NIGERIA’S ENERGY SECTOR: THE GAINS OF REFORM

 The energy sector is beginning to reflect the cumulative impact of policy reforms, argues

 SALIHU MOHAMMED

The global energy landscape is undergoing one of its most profound transformations in decades, driven by shifting geopolitics, climate pressures, and the accelerating reconfiguration of energy systems across major economies. At the heart of this transition lies a persistent global challenge: how to balance energy security, affordability, and environmental sustainability.

This so-called energy trilemma has become the defining framework for policy decisions across both developed and emerging economies. The disruption of Russian gas supplies to Europe exposed vulnerabilities in overdependence on single supply routes. At the same time, the accelerating climate crisis and rapid cost reductions in renewable technologies have forced governments to rethink long-established energy strategies.

In response, advanced economies have moved decisively. Germany fast-tracked the construction of floating LNG terminals in less than two years to cushion supply shocks. The United Kingdom has adopted a dual strategy of expanding offshore wind capacity while simultaneously issuing new oil and gas licences to maintain domestic production. In the United States, the Inflation Reduction Act has unlocked hundreds of billions of dollars in clean energy investments while sustaining the country’s role as a leading exporter of oil and gas. Japan, on its part, is betting on hydrogen and ammonia co-firing technologies as part of its long-term energy diversification plan.

Across these jurisdictions, the underlying principle is consistent: energy transition is not abrupt but carefully sequenced to safeguard economic stability and citizen welfare.

Against this global backdrop, Nigeria is increasingly aligning itself with a similar trajectory, marked by structural reforms, infrastructure expansion, and evolving investment frameworks aimed at strengthening national energy security.

One of the most significant developments in recent times is the transfer of Shell’s onshore assets to the Renaissance Africa Energy consortium. Valued at $1.3 billion with additional adjustments of up to $1.1 billion, the transaction represents a major shift in ownership and control of key oil-producing assets in the Niger Delta. Importantly, the transition has moved operatorship from an international supermajor to indigenous companies, reflecting a gradual localisation of technical and operational capacity within Nigeria’s upstream sector.

The establishment of a ring-fenced decommissioning fund has also helped to ensure environmental and operational continuity, while crude production stability has been maintained. In fact, output levels have shown improvement following the transition, underscoring the resilience of the sector under new operatorship arrangements.

In the gas sector, Nigeria’s Liquefied Natural Gas expansion continues to serve as a central pillar of its energy strategy. The NLNG Train 7 project, designed to raise production capacity from 22 to 30 million tonnes per annum, has reached approximately 92 percent completion as of May 2026. First cargo delivery is projected for the third quarter of 2026.

Beyond Train 7, preparatory work for Train 8 has been accelerated, signalling long-term expansion planning. In addition, the Federal Government has taken a final investment decision on Nigeria’s first indigenous floating LNG project, aimed at monetising flared gas from the Yoho field. These developments reflect a broader push to optimise gas resources and reduce wastage.

Nigeria has also strengthened its position in global LNG markets through long-term sales agreements with European buyers. At the same time, an LNG bunkering pilot project has been launched at the Lagos port, positioning the country to tap into emerging marine fuel markets. On the domestic front, the full allocation of liquefied petroleum gas (LPG) to the Nigerian market has contributed to a notable reduction in cooking gas prices, improving household energy affordability.

A further strategic milestone is the Africa-Atlantic Gas Pipeline project, a 6,900-kilometre energy corridor designed to connect Nigeria to Morocco and potentially extend into Europe. The project, which runs along the West African coastline, has recorded significant progress. Front-end engineering design has been completed, agreements with transit countries have been strengthened, and portions of newly secured investment frameworks have been allocated to the first phase of development.

In the domestic policy space, Executive Order No. 9 of 2024, signed by President Bola Ahmed Tinubu on 6 March 2024, has played a pivotal role in reshaping the investment climate in the oil and gas sector. The directive streamlined contracting timelines to a maximum of six months, harmonised regulatory functions across agencies, and introduced targeted fiscal incentives for non-associated gas, midstream infrastructure, and deepwater exploration projects.

The order also sought to recalibrate local content requirements in a way that preserves competitiveness while ensuring cost efficiency. Its implementation has contributed to a more predictable regulatory environment, which is increasingly seen as essential for attracting long-term capital into the sector.

These policy adjustments are already yielding visible outcomes. The regulatory landscape has been significantly streamlined, supporting key downstream developments such as the completion and operation of the Dangote Refinery, a 650,000-barrel-per-day facility now processing crude under a naira-denominated supply arrangement. Alongside this, the emergence of modular refineries has further expanded domestic refining capacity and improved supply resilience.

Stakeholders across the sector, including trade unions, marketers, suppliers, and regulators, have reported improved coordination, reduced bureaucratic bottlenecks, and more stable supply chains. This reflects a gradual but important shift in how Nigeria manages its downstream petroleum ecosystem.

In a parallel development, efforts to rehabilitate Nigeria’s state-owned refineries mark a departure from past approaches. After decades of heavy public expenditure with limited success, the current strategy avoids direct government funding. Instead, an agreement has been reached with a Chinese consortium comprising Sanjiang and Xinqianchen to complete rehabilitation works, manage operations and maintenance, and support capacity expansion, petrochemical integration, and cleaner fuel compliance.

Crucially, repayment is structured through future operational revenues, thereby shielding the national treasury from further fiscal burden. The model also opens the possibility of long-term equity participation, similar to the structure adopted in the Nigeria LNG project, signalling a shift towards sustainable public-private partnerships.

At the institutional level, the Nigerian National Petroleum Company Limited (NNPCL) has recorded notable improvements in both performance and transparency. For the 2025 financial year, the company posted a net profit of N5.76 trillion, representing a significant increase, on gross revenues exceeding N5 trillion.

Monthly foreign exchange inflows of over $2 billion are now being repatriated to the Central Bank of Nigeria, strengthening external reserves and improving macroeconomic stability. In production terms, daily crude output, including condensates, has risen from approximately 1.4 million barrels per day in late 2024 to 1.68 million barrels per day by mid-2026, reflecting a 28 percent increase. This growth has been supported by new well completions and enhanced security measures that have reduced crude theft by more than 70 percent.

Infrastructure development has also recorded progress, particularly with the Ajaokuta-Kaduna-Kano gas pipeline project. The successful completion of the River Niger crossing, widely regarded as the most technically challenging segment, represents a critical milestone in delivering gas to Nigeria’s northern industrial and power corridor.

On governance and accountability, NNPCL has introduced a more transparent operational framework. The company has published fully IFRS-compliant audited financial statements within three months of year-end, disclosed all contracts above N500 million with beneficial ownership details, and institutionalised monthly production and revenue reporting.

In addition, televised management briefings, quarterly reports in print and local languages, and over 200 community town hall engagements have strengthened public trust and institutional responsiveness. These reforms mark a significant departure from past practices and reflect a growing emphasis on accountability.

Taken together, these developments suggest a sector in transition—one that is gradually moving towards greater efficiency, improved governance, expanded infrastructure, and stronger integration into global energy markets. While challenges remain, particularly in sustaining production growth and deepening reforms across all value chains, the trajectory points toward measurable progress.

Ultimately, Nigeria’s energy sector is beginning to reflect the cumulative impact of policy reforms, investment inflows, and operational restructuring. The result is a more stable foundation for energy security, improved fiscal outcomes, and a long-term positioning of the sector for sustainable growth.

 Mohammed writes from Abuja