Oil and Gas in Nigeria: State of Play, Challenges and Future Prospects

Executive Summary

Nigeria's oil and gas sector, a pillar of the national economy, is going through a period of significant transformation. Despite a relatively modest direct contribution to Gross Domestic Product (GDP), its role is predominant in generating export earnings and government revenue. Nigeria holds substantial crude oil reserves and the largest natural gas reserves in Africa, which gives it considerable potential. Recent efforts have improved oil and gas production, notably thanks to heightened pipeline security, a major historical challenge.

The passage of the Petroleum Industry Act (PIA) in 2021 restructured the regulatory and fiscal framework, with the aim of attracting investment and promoting transparency. At the same time, growing domestic refining capacity, notably with the commissioning of the Dangote refinery, is noticeably reducing the country's dependence on imported refined products.

However, the sector still faces persistent challenges. Oil theft, although better controlled, continues to pose a threat. Infrastructure deficits, governance problems and widespread corruption hamper investment and operational efficiency. The environmental and social impacts of oil spills and gas flaring in the Niger Delta remain major concerns, affecting communities and the ecosystem.

Future prospects rest on strategic investments in deepwater exploration and gas infrastructure, as well as on energy diversification initiatives. The Nigerian government is striving to capitalize on its vast gas potential to drive industrialization and electricity supply, while promoting cleaner energy sources. For Nigeria to fully realize its potential, a holistic approach is needed, combining continued reforms, targeted investments and stronger governance.

1. Introduction

Strategic importance of the oil and gas sector to the Nigerian economy

Nigeria, often called the "Giant of Africa," has vast oil and gas resources, making this sector an essential driver of its economy. This structural dependence on hydrocarbons is a fundamental feature of the country's economic situation.  

Although the oil and gas sector's direct contribution to Nigeria's Gross Domestic Product (GDP) may seem relatively modest, ranging between 5.57% in 2024 and 6.38% in the first quarter of 2024 , this proportion does not reflect the scale of its overall economic influence. Indeed, the sector is the main provider of foreign currency and a major source of revenue for the federal government. In 2024, crude oil exports alone generated more than ₦55 trillion naira, representing 71.39% of the country's total exports. Including other petroleum products, the oil sector's share of Nigeria's total export value reached an extraordinary 88.26%. This overwhelming dominance of hydrocarbon exports, which account for more than 80% of total export earnings and nearly a third of federal government revenue , underscores a deep economic dependence.  

This disparity between the direct contribution to GDP and the preponderance in export earnings and public finances reveals that, despite ongoing discussions and stated government goals on economic diversification , Nigeria remains inherently reliant on oil and gas for its essential foreign currency inflows and its national budget. This structural dependence makes the Nigerian economy particularly vulnerable to fluctuations in global oil prices and production disruptions. The promotion of diversification, although crucial for the country's future direction, has not yet led to a fundamental change in the nation's main sources of revenue.  

Beyond its direct financial contributions, the oil and gas sector is also a significant employer. The number of direct jobs rose from 60,000 in 2023 to 63,000 in 2024, while indirect employment grew from 220,000 to 240,000. These figures attest to its considerable socio-economic footprint.  

Report objectives and structure

This report aims to provide a comprehensive analysis of the current state of Nigeria's oil and gas sector. It will examine reserves, production dynamics, economic contribution, the evolution of the regulatory framework, the main operational and structural challenges, and future prospects. It will look at the impact of recent policy reforms and major infrastructure projects, offering data-driven insights for stakeholders and decision-makers operating in this complex environment.

2. Hydrocarbon Reserves and Production

2.1. Proven crude oil and natural gas reserves

Nigeria possesses considerable hydrocarbon resources, making it a major player on the global energy stage.

Crude Oil: Nigeria has approximately 38 billion barrels of proven oil reserves, which positions it as the second-largest reserve holder in Africa and the tenth in the world. As of January 1, 2023, precise figures indicated reserves of 31.06 billion barrels of oil and 5.90 billion barrels of condensates. This solid reserve base underscores Nigeria's long-term crude oil potential.  

Natural Gas: Nigeria is endowed with immense gas resources, with proven natural gas reserves estimated at 209.26 trillion cubic feet (TCF) in January 2024. This impressive figure represents more than 2.6% of total global reserves, firmly establishing Nigeria as the ninth-largest holder of natural gas reserves in the world and the largest in Africa. The reserves comprise 102.59 TCF of associated gas (AG) and 106.67 TCF of non-associated gas (NAG). The federal government has ambitious targets to raise natural gas reserves to 210 TCF by 2025 and to 220 TCF by 2030, with a potential of 600 TCF, signaling a strong strategic focus on gas.  

The following table summarizes Nigeria's proven oil and natural gas reserves, offering a quantitative overview of the country's hydrocarbon wealth. The inclusion of global and African rankings for natural gas highlights Nigeria's strategic position on the global energy stage, while the gas reserve growth targets underscore a forward-looking strategic orientation.

Table 1: Proven Oil and Natural Gas Reserves in Nigeria (2023-2024)

Reserve Category	Period	Key Value	Unit	Source	Notes
Crude Oil	Jan 1, 2023	31.06	Billion barrels
Crude Oil	Jan 2024	38	Billion barrels		2nd in Africa, 10th worldwide
Condensates	Jan 1, 2023	5.90	Billion barrels
Associated Gas	Jan 1, 2023	102.32	Trillion cubic feet (TCF)
Associated Gas	Jan 2024	102.59	Trillion cubic feet (TCF)
Non-Associated Gas	Jan 1, 2023	106.51	Trillion cubic feet (TCF)
Non-Associated Gas	Jan 2024	106.67	Trillion cubic feet (TCF)
Total Natural Gas	Jan 1, 2023	208.83	Trillion cubic feet (TCF)
Total Natural Gas	Jan 2024	209.26	Trillion cubic feet (TCF)		9th worldwide, 1st in Africa
Gas Target	2025	210	Trillion cubic feet (TCF)
Gas Target	2030	220	Trillion cubic feet (TCF)		Potential of 600 TCF

2.2. Crude oil production trends

Crude oil production in Nigeria has shown signs of recovery, although challenges persist in meeting quotas and securing investment.

Current Production: Nigeria's crude oil and condensate production reached 1.6 million barrels per day (bpd) in April 2025. More broadly, in November 2024 the country was producing 1.690 million barrels per day (mbpd), retaining its position as Africa's largest oil producer. In the first quarter of 2024, average daily oil production was 1.57 mbpd, an increase from 1.51 mbpd in the first quarter of 2023 and 1.55 mbpd in the fourth quarter of 2023.  

Production Forecasts: The country's crude oil production reached 1.5 mbpd in 2024 and is expected to rise to 1.7 mbpd in 2025. The major international oil companies are also stepping up their activities; Shell is advancing its Bonga North deepwater oil and gas field, a US$5 billion project, targeting first oil by mid-2027. For its part, TotalEnergies is targeting 70,000 bpd from its Ubeta gas field, a US$550 million project, by the same year.  

OPEC+ Quotas: Despite its potential, Nigeria has historically struggled to meet its OPEC+ quota. For example, its average production was only 1.4 mbpd in the first quarter of 2025, below its quota of 1.8 mbpd. Nigeria's current OPEC+ crude oil quota is 1.5 mbpd, and it is expected to remain in force until the end of 2025. NNPCL Chief Executive Bashir Ojulari is actively lobbying for a 25% increase in the production quota by 2027, with an ambitious target of 2 mbpd.  

Pipeline Availability: A notable operational improvement has been achieved in pipeline security. The Nigerian National Petroleum Company Limited (NNPCL) announced 100% availability of crude oil pipelines for June 2025. This important milestone is largely attributed to a transformative partnership with Pipeline Infrastructure Nigeria Limited (PINL), whose community-focused approach turned host community distrust into active participation. This represents a dramatic improvement over the periods when Nigeria was losing about US$700 million a month to theft, with some pipelines carrying only 5% of the crude pumped.  

The following table presents a dynamic and comparative view of Nigeria's oil production performance. By comparing actual production with OPEC+ quotas, it highlights the country's compliance challenges and the persistent gap between its production potential and its actual output.

Table 2: Average Daily Crude Oil Production in Nigeria (2024-2025)

Period	Production (mbpd)	Notes	Source
Q1 2024	1.57
Nov 2024	1.690	Africa's largest producer
Q1 2025	1.4
April 2025	1.6	Crude oil and condensates
2024 Annual Average	1.5
2025 Annual Forecast	1.7
OPEC+ Quota (current)	1.5	Quota through end of 2025
OPEC+ Quota (Q1 2025)	1.8	Quota not met
2027 OPEC+ Quota Target	2.0	NNPC seeks a 25% increase

The improvement in pipeline security is a major operational advance. However, the fact that Nigeria continues to struggle to reach its OPEC+ quota of 1.8 mbpd, averaging only 1.4 mbpd in the first quarter of 2025 , and that its current quota remains at 1.5 mbpd , indicates that this achievement, though commendable, is not sufficient on its own to lift Nigeria's overall crude oil production to the desired levels. This suggests that the root causes of underproduction go beyond pipeline security alone. Other persistent problems, such as underinvestment in onshore fields, stalled projects and funding constraints , including NNPCL's inability to fund its 55% share in joint ventures with international oil companies, continue to limit production. Consequently, the success in pipeline security merely removes one major obstacle, revealing other, more complex structural challenges related to capital allocation, project execution and the overall fiscal attractiveness of the upstream sector. For Nigeria to truly unlock its full production potential, these deeper issues must be addressed comprehensively.  

2.3. Natural gas production and use

Nigeria holds enormous natural gas reserves, but their exploitation and use remain below full potential.

Current Production: Natural gas production reached 7,473 million standard cubic feet per day (mmscf/d) in April 2025. Between January and November 2024, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported total production of 2,292,951 mmscf.  

Utilization: Of total gas production between January and November 2024, a substantial 92.3% was used domestically and exported, while 7.58% was flared. In February 2023, 149 billion standard cubic feet per day of natural gas were produced, with associated gas accounting for 72.15% (108 billion scf/day) and non-associated gas 42 billion scf/day.  

Untapped Potential: Despite its 210 TCF of proven gas reserves, Nigeria currently produces only 4.3 billion standard cubic feet per day (Bscfpd), with the majority exported as liquefied natural gas (LNG). Nigeria was the world's sixth-largest LNG exporter in 2022, with 692 billion scf exported. With a reserves-to-production ratio of about 140 years, the country's underdeveloped gas resources represent a significant opportunity for exploitation, particularly for the domestic economy. The government recognizes that an adequate gas supply is crucial to increasing industrial output and power generation, thereby fostering economic growth, prosperity and job opportunities.  

Initiatives: The federal government has declared 2020-2030 the "Decade of Gas Development for Nigeria," with the ambitious goal of fully fueling its economy with gas by 2030. In addition, three new gas projects were inaugurated in 2024: the expanded AHL gas processing plant, the ANOH gas processing plant and the 23.3 km ANOH to Obiafu-Obrikom-Oben (OB3) Custody Transfer Metering Station gas pipeline. These projects are expected to increase domestic gas supply by 25% once completed.  

There is a striking contrast between Nigeria's immense gas endowment and its current use. Nigeria has the largest natural gas reserves in Africa and ranks among the top 10 worldwide, with more than 209 TCF. This points to colossal potential. However, despite this vast wealth, Nigeria's current gas production (4.3 Bscfpd) represents only a fraction of its potential, resulting in an exceptionally high reserves-to-production ratio of about 140 years. Moreover, a significant share (7.58% from January to November 2024) of the gas produced is flared , causing environmental damage and substantial economic loss , even as the government promotes the "Decade of Gas" initiative to meet national energy needs.  

This situation highlights a fundamental disconnect between resource endowment and its effective use. While initiatives like the "Decade of Gas" and new gas projects are crucial, they face significant obstacles in closing this gap. Underutilization and gas flaring represent a profound opportunity cost for Nigeria, preventing it from fully leveraging this resource for industrialization, power generation and economic diversification. This points to systemic problems related to infrastructure, investment and policy execution that must be addressed urgently to unlock Nigeria's full gas potential.  

3. Economic Contribution and Revenue Streams

3.1. Impact on Gross Domestic Product (GDP) and economic growth

Nigeria's oil and gas sector plays a complex and fluctuating role in the country's economic growth. Nigeria's Gross Domestic Product (GDP) grew by 2.98% (year-on-year) in the first quarter of 2024. The oil sector recorded real growth of 5.70% (year-on-year) in the first quarter of 2024, a notable improvement over the -4.21% recorded in the first quarter of 2023.  

The oil sector contributed 6.38% to total real GDP in the first quarter of 2024, up from 6.21% in the corresponding period of 2023 and 4.70% in the fourth quarter of 2023. This indicates a positive, though fluctuating, trend in its direct contribution. However, in the fourth quarter of 2024, the oil sector's contribution to real GDP declined slightly to 4.6%, compared with 4.7% in the fourth quarter of 2023 and 5.57% in the third quarter of 2024. Real growth in the oil sector also slowed to 1.48% year-on-year in the fourth quarter of 2024, a notable drop from 12.11% in the fourth quarter of 2023.  

Overall, the oil and gas industry's share of GDP rose slightly to 5.57% in 2024, from 5.48% in 2023. This steady growth underscores the sector's resilience and continued importance. The non-oil sector has consistently contributed a larger share of GDP, accounting for 93.62% in the first quarter of 2024 and 95.4% in the fourth quarter of 2024. This highlights the growing importance of other economic segments, although the oil sector remains crucial for foreign currency.  

The table below offers a nuanced, comparative view of the oil sector's economic role within the Nigerian economy. By clearly presenting the oil sector's direct contribution to GDP and its year-on-year growth rates, it provides concrete data for assessing its performance. By juxtaposing the oil sector's contribution with that of the non-oil sector, the table immediately illustrates the oil sector's relative size within the overall economy, helping to correct the common misconception that it makes up the majority of GDP.  

Table 3: Contribution of the Oil and Gas Sector to Nigeria's GDP (2023-2024)

Period	Oil Sector Growth (YoY %)	Oil Sector Contribution to Real GDP (%)	Non-Oil Sector Contribution to Real GDP (%)	Overall GDP Growth (YoY %)	Source
Q1 2023	-4.21	6.21	93.79	2.31
Q4 2023	12.11	4.70	95.30	3.46
Q1 2024	5.70	6.38	93.62	2.98
Q4 2024	1.48	4.6	95.4	3.84
Annual 2023	N/A	5.48	N/A	N/A
Annual 2024	N/A	5.57	N/A	3.4

3.2. Government revenues and dependence on hydrocarbons

Federal government revenues from the oil and gas sector have grown robustly, being roughly 70% higher in February 2025 than in February 2024. More precisely, they brought in 70.49% more than the ₦477 billion recorded in the same period the previous year.  

In February 2025, total federal revenue stood at ₦2.732 trillion, with oil revenue contributing ₦813.22 billion (30% of total revenue), while non-oil revenue accounted for ₦1.9 trillion (70%). This indicates a significant contribution from the non-oil sector to overall government revenue. For the first quarter of 2025, the Nigerian government generated ₦6.9 trillion in revenue, representing a substantial 40% year-on-year increase over the ₦5.2 trillion recorded in the corresponding period of 2024. This increase is mainly attributed to ongoing reforms, particularly in exchange rate policy, and better fiscal governance.  

Annual government revenue has followed a positive trajectory, rising from about ₦12.5 trillion to more than ₦20 trillion in 2024. Despite these gains, the Minister of Finance acknowledged that oil revenue performance fell short of projections because oil prices dropped below the production benchmark and global prices fluctuated , underscoring the sector's inherent volatility. Encouragingly, the debt service-to-revenue ratio stood at 60% at the end of 2024, a significant improvement from the 150% recorded in the first quarter of 2023.  

3.3. Performance of crude oil and liquefied natural gas (LNG) exports

Hydrocarbon exports overwhelmingly dominate Nigeria's trade landscape, although different dynamics are observed between crude oil and liquefied natural gas (LNG).

Total Exports: The total value of Nigeria's exports reached ₦77.44 trillion in 2024, a substantial increase from ₦35.96 trillion in 2023. In the first quarter of 2024, exports amounted to ₦19,167.36 billion, an increase of 195.47% over the first quarter of 2023. The second quarter of 2024 saw exports valued at ₦19,418.93 billion.  

Crude Oil: Crude oil alone generated more than ₦55 trillion in export revenue in 2024, representing a dominant 71.39% share of total exports. Combined with other petroleum products, the oil sector's contribution reached an extraordinary 88.26% of Nigeria's export value in 2024. In the first quarter of 2024, crude oil exports were valued at ₦15,486.63 billion, or 80.80% of total exports. In the second quarter of 2024, crude oil exports amounted to ₦14,559.56 billion, representing 74.98% of total exports.  

LNG: In December 2023, the value of Nigeria's liquefied natural gas (LNG) exports stood at US$728.8316 million, an increase of 20.83% year-on-year. However, for the full year 2023, the value of LNG exports was US$5,737.8752 million, a decrease of 13.54% year-on-year. Total natural gas exports in 2023 were 29,650.290 million cubic meters. In the first quarter of 2024, LNG accounted for approximately 8.8% of Nigeria's total exports. Between January and November 2024, Nigeria's natural gas export sales amounted to 829,156 mmcf out of total production of 2,292,951 mmscf.  

Main Buyers of Crude Oil: India (25.5%), Spain (18.4%) and the United States (10.2%) remain the main buyers of Nigerian crude, underscoring the global importance of Nigeria's energy resources.  

4. Legislative and Institutional Framework

4.1. The Petroleum Industry Act (PIA) 2021: Key provisions and impact

The Petroleum Industry Act (PIA) of 2021 represents a major legislative reform for Nigeria's oil sector, aimed at modernizing its legal, governance, regulatory and fiscal framework. The Act replaces the old Petroleum Act of 1969 and repeals several other obsolete laws, thereby creating a clearer and more predictable environment for investors.  

One of the PIA's fundamental objectives is to accelerate economic growth by increasing investment in oil and gas production, developing midstream gas infrastructure and encouraging frontier exploration. The Act also aims to establish good governance through an efficient and predictable acreage management system and a solid regulatory framework. The clarity the PIA has brought to the fiscal and legal framework has already had a positive impact, leading to a 32% increase in field development plan (FDP) approvals in 2024 compared with 2023, which reflects growing investor confidence in committing funds to long-term investments in the industry.  

The PIA introduced significant institutional changes. It maintained the role of the Minister of Petroleum for policy formulation and oversight. However, it also created new independent regulatory entities: the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), responsible for the technical and commercial regulation of upstream operations , and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), responsible for the technical and commercial regulation of midstream and downstream operations. In addition, the former Nigerian National Petroleum Corporation (NNPC) was transformed into a limited liability company, the Nigerian National Petroleum Company Limited (NNPC Limited), operating under the principles of the Companies and Allied Matters Act (CAMA) of 2020, without recourse to government funding for its operations.  

With regard to licensing, the PIA maintains the provisions of the old Petroleum Act while establishing the possibility of joint venture arrangements with NNPC Limited. It also requires that different companies be responsible for upstream, midstream and downstream operations. The Act promotes transparent and competitive contracts, as well as improved environmental measures.  

The fiscal framework has been revised to be more predictable, stable and competitive. The PIA introduced a new tax regime by repealing the petroleum profits tax and replacing it with a hydrocarbon tax and a companies income tax on petroleum companies. Hydrocarbons, including crude oil, condensates and natural gas liquids produced from associated gas, are now subject to tax, with the exception of crude oil from deepwater. Generous incentives are provided for the release of arbitral awards.  

A crucial aspect of the PIA is the establishment of the Host Community Development Fund, which provides for an annual contribution equivalent to 3% of the operating expenditure of petroleum license holders, thereby ensuring that communities affected by oil and gas operations benefit directly from these activities. The Act also prohibits gas flaring or venting except in emergencies or with an exemption, and requires the installation of metering equipment for flared volumes, as well as the establishment of decommissioning and abandonment funds for petroleum infrastructure.  

4.2. Regulatory and governance bodies

Nigeria's oil and gas sector is overseen by a set of government bodies, each with specific responsibilities for ensuring compliance, sustainability and the development of the industry.

The Ministry of Petroleum Resources (MPR) is the government body responsible for formulating and implementing the policies that govern Nigeria's oil and gas industry. It plays a key role in setting the sector's strategic direction.  

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), formerly the Department of Petroleum Resources (DPR), is responsible for the technical and commercial regulation of upstream petroleum operations. It oversees exploration, development and production, and is responsible for granting petroleum exploration licenses (PEL) and petroleum prospecting licenses (PPL). The NUPRC is also responsible for monitoring production levels and collecting royalties.  

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) is responsible for the technical and commercial regulation of midstream and downstream petroleum operations. Its responsibilities include regulating gas infrastructure, setting gas prices and overseeing the distribution of petroleum products.  

In addition to these key entities, other bodies play a crucial role:

• The Federal Ministry of Environment (FMEnv) and the National Environmental Standards and Regulations Enforcement Agency (NESREA) are responsible for environmental protection and development, biodiversity conservation and the enforcement of environmental laws and regulations, including the issuance of environmental impact assessment (EIA) certificates. NESREA is empowered to enforce all environmental laws, guidelines, policies, standards and regulations in Nigeria.
• The Federal Inland Revenue Service (FIRS) is responsible for the administration and collection of federal government revenue in the petroleum industry.
• The Nigerian Content Development and Monitoring Board (NCDMB) supervises and manages the development of Nigerian content in the oil and gas industry, encouraging indigenous participation and the transfer of technology and skills.
• The National Oil Spill Detection and Response Agency (NOSDRA) is the lead agency for oil spill detection and response, requiring operators to submit oil spill contingency plans and to report incidents promptly.

These bodies work collectively to create a robust regulatory framework, although challenges persist in the form of overlapping responsibilities and bureaucracy, which can hold back investment.  

5. Major Challenges Facing the Sector

Nigeria's oil and gas sector, despite its potential, faces a series of complex challenges that hinder its full performance and sustainability.

5.1. Security and oil theft

Oil theft and pipeline vandalism have long been major scourges for the Nigerian oil industry, causing considerable economic losses and devastating environmental impacts. For nearly half a century, Nigeria's vast economic promise has been crippled by these criminal activities. The country has lost billions of dollars every year, with critical oil infrastructure repeatedly sabotaged by criminal syndicates and their local collaborators.  

The scale of these losses is staggering, with reports indicating losses of more than 200,000 barrels per day. At its worst, Nigeria was losing about US$700 million a month to theft. Vital pipelines such as the Trans-Niger Pipeline (TNP) sometimes delivered only 5% of the crude pumped because of relentless attacks. Between 2019 and 2022, NNPCL spent roughly ₦147 billion (about US$100 million) on repairs and security, with daily spending reaching ₦123 million. These criminal activities caused crude production to fall to just 1.35 million barrels per day in early 2025, well below the budget target of 2.02 million bpd and OPEC quotas.  

Oil theft is often facilitated by active collusion within the state and its agencies, involving well-connected actors, including members of the military, governors and oil companies. This criminal enterprise fuels corruption, finances illegal activities and devastates the environment through spills and pollution.  

However, a notable improvement has been observed. The Nigerian National Petroleum Company Limited (NNPCL) reported 100% availability of crude oil pipelines for June 2025, a milestone previously unimaginable. This achievement is largely due to a transformative partnership with Pipeline Infrastructure Nigeria Limited (PINL), whose community-focused approach turned host community distrust into active participation. Intelligence-led ground operations rapidly dismantled illegal tapping networks, with the discovery of 39 illegal refineries and 12 unauthorized pipeline connections in a single week in January 2025.  

Despite this progress, oil theft has not completely disappeared; criminal syndicates are adopting new tactics, including underwater drones and encrypted communications. Pipeline security, while crucial, is not enough on its own to achieve Nigeria's broader production targets, which are also hampered by underinvestment in onshore fields and stalled projects.  

5.2. Infrastructure deficits

Despite its resource wealth, Nigeria is paradoxically afflicted by a significant infrastructure deficit, particularly pronounced in its crucial oil and gas sector. This lack of investment in critical infrastructure and technology hinders the sector from maximizing its potential.  

Nigeria's transport networks, both road and rail, suffer from underinvestment, insufficient maintenance and inadequate expansion. This hampers the transport of equipment, personnel and products essential to the oil and gas industry, increasing costs and operational risks.  

Despite abundant gas reserves, Nigeria faces chronic electricity shortages. This deficiency not only affects domestic consumption but also limits the availability of reliable energy sources for oil and gas operations, requiring the use of costly alternatives such as diesel generators.  

Inefficient port facilities exacerbate delays and congestion in the import of equipment and materials crucial to oil and gas projects. This inefficiency lengthens project timelines and raises operating costs.  

Insufficient refining capacity is a major historical problem, leading to heavy dependence on imported petroleum products. This dependence not only drains foreign currency reserves but also disrupts supply chains, affecting the stability of oil and gas operations. Although the situation is improving with the commissioning of new refineries, the problem has persisted for a long time.  

These infrastructure gaps, combined with security and regulatory problems, have deterred investment, slowing the development of critical infrastructure and the growth of the industry.  

5.3. Governance issues and corruption

Corruption and governance problems are major obstacles to the growth and stability of Nigeria's oil and gas sector. The Economic and Financial Crimes Commission (EFCC) has uncovered "staggering" levels of corruption in the oil and gas sector, stressing that the ongoing investigation only scratches the surface of widespread fiscal malfeasance.  

The EFCC chairman has drawn a direct link between resource mismanagement and rising insecurity, including banditry, kidnappings and terrorism, which are often fueled by the diversion of funds meant to improve citizens' lives. He also highlighted the legal obstacles to fighting corruption, noting that current laws prevent the prosecution of individuals with suspicious wealth unless a specific "predicate offense" is proven, and he advocated the adoption of an unexplained wealth law.  

Tracking down Nigeria's looted funds around the world is an arduous task. The EFCC is tracing illicit assets in several countries, but resistance from the "foreign custodians" of those assets makes recovery extremely difficult, with the belief that even the most effective anti-corruption agency cannot recover more than half of what was stolen. This highlights international complicity in sustaining corruption in Nigeria.  

There is also a culture of impunity in the Nigerian public sector, where individuals who are prosecuted are often celebrated and institutions ignore the basic principles of financial accountability. The ineffectiveness of refinery maintenance contracts, for example, is attributed to the awarding of contracts to companies without expertise, which damaged the refineries instead of repairing them, with no one being punished.  

Uncertainty around government policies and the lack of consistency in the legal framework are major brakes on investment in Nigeria's oil and gas sector. A sprawling bureaucracy, involving up to 20 federal agencies in the approval process, stifles operators and pushes investment toward other, smaller oil-producing countries. Overlapping responsibilities and conflicts between regulatory agencies hinder new investment in this vital sector.  

Corruption, waste and resource mismanagement are the main reasons for Nigeria's underdevelopment and its excessive reliance on borrowing. Transparency in revenue generation and accountability in public spending are essential to the country's development.  

5.4. Environmental and social impacts (oil spills, gas flaring)

Oil and gas operations in Nigeria have had devastating environmental and social repercussions, particularly in the Niger Delta, where communities bear the brunt of pollution.

Oil Spills: Oil spills have a major impact on the ecosystem and can lead to ecocide. Vast stretches of mangrove forest, which are particularly sensitive to oil because it is stored in the soil and released annually during floods, have been destroyed. These spills contaminate farmland, lakes and rivers, destroying local crops and depleting animal and fish populations. In farming communities, a year's food supply can be destroyed instantly. The consumption of dissolved oxygen by bacteria feeding on the spilled hydrocarbons also contributes to fish kills.  

Residents of the Niger Delta are forced to drink, cook and wash with polluted water; they eat fish contaminated with oil and other toxins, if they are lucky enough to find any. Communities complain of health problems, but their concerns are not taken seriously, and the oil industry continues to pollute the environmental resources they need to survive. One study found that an alarming 60% of the region's population suffers from health problems caused by oil pollution, and 75% of respondents reported negative impacts on local biodiversity, including animals, fish and birds. Cleanup operations are often inadequate, and local contractors may use dangerous methods such as burning the oil, which further destroys natural resources.  

Gas Flaring: Gas flaring, the burning of associated gas that emerges from crude oil extraction, is a persistent problem in Nigeria, despite the country's vast gas deposits. Nigeria ranks seventh among the top 10 gas-flaring countries in the world, with a 10% increase in gas flaring intensity between 2012 and 2021. Gas flaring is responsible for the emission of greenhouse gases, ozone depletion, global warming and climate change.  

Gas flaring releases nitrogen and sulfur oxides which, when mixed with moisture in the air, create acid rain, devastating agricultural yields and aquatic life. In oil communities, those whose farmland is close to processing stations are the hardest hit. Flaring has cost the federal government billions of dollars in lost revenue. It is also considered a violation of the fundamental right to life and the dignity of the human person, because it makes the environment dangerous and unhealthy.  

Despite announced commitments to reduce flaring, Niger Delta communities continue to live under the daily burden of active flares, many of them located just meters from homes, farms and water sources. Nigeria has pledged to reduce methane emissions by 60% by 2031. However, delays in implementing these commitments mean deepening poverty, worsening public health and an escalating climate risk profile for Nigeria. Oil companies are being called on to publicly disclose their progress on flaring reduction, including methane emission reduction plans, field by field.  

6. Domestic Refining and Energy Independence

Nigeria is undergoing a transformation to reduce its heavy dependence on imports of refined petroleum products, through the expansion of its domestic refining capacity.

6.1. Current refining capacity and major projects (Dangote Refinery)

Nigeria's refining capacity is growing significantly, mainly thanks to the commissioning of the Dangote refinery. The Dangote refinery, with a nameplate capacity of 650,000 barrels per day (bpd), currently processes about 550,000 barrels per day. Since the start of its operations in 2024, this refinery has relied heavily on crude imported from the United States, Brazil, Ghana, Angola and Equatorial Guinea. However, Aliko Dangote has announced that the refinery will use exclusively Nigerian crude by the end of 2025, a monumental shift aimed at saving billions in foreign currency and stabilizing the naira.  

Alongside Dangote, Nigeria is working to rehabilitate its state-owned refineries. The Nigerian National Petroleum Company (NNPC) has engineering contracts in place for the rehabilitation of its Port Harcourt (210,000 bpd), Warri (125,000 bpd) and Kaduna (110,000 bpd) refineries. Capacity of 60,000 bpd was restarted at Port Harcourt in late 2024, although it was shut down again in May 2025. The Warri refinery also restarted in December 2024, reaching 78,000 bpd before being shut down in January 2025. These state-owned refineries, although undergoing rehabilitation, have historically operated below capacity.  

In addition to the large refineries, private modular refineries such as Aradel, Waltersmith and OPAC provide further support to domestic refining efforts. A new large-scale refinery is also planned: Backbone Infrastructure Nigeria Limited (BINL) has announced the construction of a 500,000 bpd crude oil refinery in Ondo State, a project estimated at about US$15 billion. The first phase, a 100,000 bpd unit, is expected to be completed within 48 months. If this project materializes, it will become the country's second-largest refinery after Dangote.  

In total, as of May 2025, Nigeria's estimated functional refining capacity stood at approximately 974,500 bpd, of which the Dangote refinery accounts for nearly 67%. NNPC's goal is to reach local refining capacity of about 1 million bpd within the next two years.  

6.2. Reducing dependence on refined product imports

The increase in domestic refining capacity is already having a significant impact on reducing Nigeria's dependence on fuel imports. Nigeria is on its way to becoming a net exporter of refined petroleum products again.  

Nigeria's gasoline import bill fell sharply in the first quarter of 2025, from ₦3.81 trillion in the same period of 2024 to ₦1.76 trillion, a difference of more than ₦2 trillion. This represents a 54% year-on-year decline and a 47% reduction from the fourth quarter of 2024. This sharp drop is largely attributed to the increased domestic supply from the Dangote refinery, which has stepped up its operations. The arrival of this refinery is beginning to displace foreign suppliers and reduce Nigeria's long-standing dependence on imported refined fuels.  

A five-year trend analysis shows a steady increase in gasoline imports up to 2024, reaching an all-time high of ₦3.81 trillion in the first quarter of 2024. The sharp decline in 2025 to ₦1.76 trillion marks a return to pre-2022 levels and signals a possible structural shift in the dynamics of the country's petroleum trade.  

The Dangote refinery, which is currently producing about 85% of its installed capacity of 650,000 bpd, has created increased competition in the downstream market, leading to lower retail gasoline prices in Lagos. This transition toward fuel self-sufficiency is expected to generate substantial foreign currency savings, estimated at between US$25 billion and US$30 billion per year, thereby strengthening Nigeria's financial soundness.  

Despite these gains, regional trade routes remain crucial to meeting domestic fuel demand, as full local self-sufficiency has not yet been achieved. Gasoline was Nigeria's most imported product from ECOWAS countries in the first quarter of 2025, accounting for 44.51% of all imports from the region. This highlights the persistent supply gaps in Nigeria's downstream oil sector.  

7. Future Outlook and Diversification Efforts

Nigeria is striving to capitalize on its vast oil and gas resources while seeking to diversify its economy and ensure a sustainable energy transition.

7.1. Future investment projects in the oil and gas sector

Significant investments are planned in Nigeria's oil and gas sector, particularly in deepwater and gas projects, signaling a desire to boost production and tap underused resources.

Shell is advancing its Bonga North deepwater oil and gas field, a US$5 billion project, targeting first oil by mid-2027. The company is also considering a final investment decision (FID) for the Bonga Southwest-Aparo project, valued at US$8 billion. TotalEnergies, for its part, is targeting 70,000 bpd from its Ubeta gas field, a US$550 million project, by 2027, and plans an FID on the IMA gas field in 2026. These projects are part of a broader Nigerian government initiative to encourage collaboration among oil companies to increase production.  

The Nigerian government has also approved a strategic package of incentives, including VAT exemptions on gas, diesel, electric vehicles and clean cooking solutions, as well as tax credits for new deepwater oil and gas investments. This aims to attract more capital to the sector.  

NNPC Limited remains committed to increasing its stake in the Dangote refinery, where it currently holds a 7.2% interest. The company had previously planned to raise its stake to 20%. These investments, although promising for long-term revenue growth, involve significant capital expenditure (CAPEX) and execution risks linked to Nigeria's history of project delays and security problems.  

7.2. Frontier exploration opportunities

The Petroleum Industry Act (PIA) of 2021 actively promotes frontier exploration, notably in unexplored sedimentary basins. This initiative aims to discover new reserves and expand the country's resource base beyond traditional regions.  

Particular emphasis is placed on deepwater exploration and the development of non-associated gas fields. Deepwater projects, such as those of Shell and TotalEnergies mentioned earlier, demonstrate the potential of this frontier. Nigerian companies such as Frontier Oil Limited are also focusing on developing oil and non-associated gas fields, seeking to increase production and identify further growth opportunities. Deepwater exploration in Africa is entering a new era, driven by high-impact discoveries and strategic investments.  

7.3. Energy and economic diversification initiatives

The Nigerian government is firmly committed to diversifying its economy beyond its historical dependence on crude oil. This strategy aims to strengthen fiscal stability and create an environment more conducive to industrial growth.  

A major focus of this diversification is tapping Nigeria's vast gas potential. The government has declared 2020-2030 the "Decade of Gas Development for Nigeria," with the goal of fully fueling its economy with gas by 2030. An adequate gas supply is seen as a way to increase industrial output and electricity supply, thereby fostering economic growth and job creation. Critical gas infrastructure projects, such as the Ajaokuta-Kaduna-Kano (AKK) gas pipeline, are under development to improve domestic gas use and support economic growth. A recently signed gas sales and purchase agreement with Shell, TotalEnergies and Eni is expected to generate US$1.5 billion in annual export revenue and create job opportunities.  

Investment in the refining and petrochemical industries is also a pillar of this strategy. The Dangote refinery, for example, aims to reduce fuel imports and boost local production, thereby contributing to energy independence and value creation.  

In addition, Nigeria is actively exploring opportunities in renewable energy. The country recognizes the potential of off-grid solutions for rural areas. Beginning January 1, 2025, Nigeria requires petroleum license applicants to demonstrate low carbon emissions and a renewable energy program, in line with the goal of reaching net-zero emissions by 2060. The government has also put in place incentives, such as VAT exemptions on gas, diesel, electric vehicles and clean cooking solutions, as well as tax credits for new deepwater oil and gas investments.  

These diversification efforts aim to reduce the economy's vulnerability to oil price fluctuations and to create a broader, more resilient economic base, leveraging the country's natural resources to drive industrialization and job creation.  

8. General Conclusions

Nigeria's oil and gas sector is undeniably at a crossroads, characterized by notable advances and persistent challenges. Its strategic importance to the Nigerian economy remains paramount, as the main generator of export earnings and a major contributor to public finances, despite a relatively modest direct contribution to GDP. This structural dependence, even as the country seeks to diversify, exposes the economy to external commodity price shocks.

Significant progress has been made, notably in pipeline security. NNPCL's ability to report 100% availability of crude oil pipelines for June 2025, thanks to innovative community partnerships, represents a major operational victory against a long-standing problem. This improvement is crucial for stabilizing production.

At the same time, the growth in domestic refining capacity, particularly with the commissioning of the Dangote refinery, is transforming the national energy landscape. The dramatic reduction in gasoline imports in the first quarter of 2025 demonstrates the potential of this initiative to save foreign currency and strengthen energy independence.

However, Nigeria faces a major paradox regarding its vast natural gas reserves. Despite being the largest holder of gas reserves in Africa, a significant portion of this potential remains untapped or is lost through flaring, representing a considerable economic and environmental opportunity cost. Gas flaring, in particular, continues to cause ecological damage and health problems in the Niger Delta.

Structural challenges such as widespread corruption, infrastructure deficits and regulatory bureaucracy continue to hinder investment and the full realization of the sector's potential. Corruption investigations reveal the scale of the problem, which undermines investor confidence and diverts vital resources.

Looking ahead, Nigeria must maintain the momentum of reforms and investment. Deepwater projects and gas development initiatives are essential to increase production and diversify revenue sources. The "Decade of Gas" and investment incentives for gas infrastructure are positive steps toward tapping this underused resource, not only for export but also for industrialization and domestic power generation. The commitment to renewable energy and carbon emission reduction is also crucial for sustainable growth.

In sum, Nigeria is engaged in a delicate balancing act: maximizing the value of its existing oil and gas resources while laying the foundations for a more diversified and sustainable economy. Success will depend on the government's ability to strengthen governance, attract transparent investment and decisively tackle the industry's environmental and social impacts.