Prof. Wumi Iledare
Nigeria’s oil and gas sector has made measurable progress under the Petroleum Industry Act (PIA) and the administration of President Bola Ahmed Tinubu, but significant structural challenges continue to hinder the full realization of the sector’s potential, according to leading petroleum economist Professor Wumi Iledare.
In an assessment of the industry’s performance under the landmark petroleum reform law, Iledare argued that while important reforms have been initiated, Nigeria remains in a transitional phase rather than a period of full-scale transformation.
The Petroleum Industry Act, enacted in 2021 after nearly two decades of legislative deliberations, was designed to overhaul Nigeria’s oil and gas sector by improving governance, enhancing regulatory certainty, attracting investment, commercializing the national oil company, strengthening host community participation, and accelerating gas development.
According to Iledare, the legislation represented a historic opportunity to reposition Africa’s largest oil producer from dependence on petroleum revenues toward a model that generates sustainable economic value from its hydrocarbon resources.
“The critical question is not whether reforms have begun, but whether the aspirations of the PIA are translating into measurable economic outcomes,” he said.
Reform Momentum and Policy Shifts
The energy expert noted that the Tinubu administration has demonstrated a willingness to address longstanding distortions within the petroleum sector through major policy interventions.
Among the most significant measures was the removal of Nigeria’s costly fuel subsidy regime, a move that generated widespread public debate but was viewed by many economists as necessary to improve fiscal sustainability and reduce market distortions.
He also cited recent executive orders aimed at improving fiscal competitiveness, streamlining project approvals, and lowering operating costs for investors as evidence of efforts to attract fresh capital into Nigeria’s upstream oil and gas industry.
“These policy actions indicate a recognition that Nigeria must compete more effectively for global energy investment at a time when capital is increasingly selective,” he noted.
Domestic Refining Gains
Iledare highlighted the emergence of large-scale domestic refining capacity as one of the most important developments in Nigeria’s energy sector in recent years.
The commencement of operations at the Dangote Refinery, alongside ongoing efforts to rehabilitate state-owned refineries, has altered long-standing assumptions about Nigeria’s dependence on imported petroleum products.
If successfully sustained, he said, domestic refining could strengthen energy security, conserve foreign exchange reserves, create industrial linkages, and improve the resilience of the country’s fuel supply chain.
The economist also pointed to recent improvements in crude oil production, suggesting that government efforts to combat oil theft, pipeline vandalism, and operational disruptions may be producing positive results.
Investment Challenges Persist
Despite these gains, Iledare cautioned that Nigeria continues to face intense competition for international energy investment from other oil-producing jurisdictions.
Global investors, he argued, remain focused on regulatory stability, contract sanctity, security conditions, fiscal attractiveness, and ease of doing business when allocating capital.
He identified the absence of a clearly visible and experienced sectoral leadership structure as a continuing concern, arguing that stronger strategic direction is required to fully unlock the industry’s potential.
“Progress should not be confused with transformation,” he said. “Nigeria has improved its investment climate, but substantial barriers to investment remain.”
NNPC Commercialisation and Governance
The assessment also highlighted the ongoing transition of the Nigerian National Petroleum Company (NNPC) Limited into a fully commercial enterprise as envisioned under the PIA.
According to Iledare, the credibility of the reform agenda will depend heavily on the company’s ability to operate transparently, efficiently, and with minimal political interference.
He emphasized that greater accountability, stronger corporate governance, and enhanced operational transparency remain essential to building investor confidence.
Similarly, while Host Community Development Trusts established under the PIA have created new frameworks for engagement between energy companies and host communities, governance challenges and implementation gaps continue to affect their effectiveness.
Untapped Potential in Natural Gas
The economist argued that Nigeria has yet to fully capitalize on its vast natural gas resources despite the government’s “Decade of Gas” initiative.
With one of the largest gas reserves in the world, Nigeria has the opportunity to use natural gas as a catalyst for industrialization, power generation, job creation, export growth, and energy transition objectives.
However, infrastructure deficits, policy inconsistencies, financing constraints, and implementation challenges continue to limit the sector’s growth.
“The full economic and developmental benefits of Nigeria’s gas resources remain largely unrealized,” he observed.
Measuring Success Beyond Policy Announcements
Iledare stressed that the ultimate measure of the PIA’s success should not be the number of reforms announced or regulations enacted.
Instead, he said, success should be assessed through tangible outcomes, including increased investment inflows, stronger energy security, higher domestic value creation, employment generation, industrial expansion, and improvements in living standards.
“The legislation creates opportunities, but institutions, implementation, governance, and accountability determine whether those opportunities are converted into economic value,” he said.
A Sector in Transition
Overall, Iledare described the current phase of Nigeria’s petroleum sector as one of recovery and reform rather than complete transformation.
While policy inertia has been replaced by a more active reform agenda, the sector continues to grapple with infrastructure constraints, governance concerns, production challenges, and implementation gaps.
He concluded that the long-term success of the Petroleum Industry Act will depend less on the quality of the legislation itself and more on the consistency, discipline, and effectiveness with which its provisions are executed.
“The future of Nigeria’s oil and gas sector will be determined not by what is written in the Petroleum Industry Act, but by how faithfully and effectively its provisions are implemented,” he said.
As Africa’s largest economy seeks to attract investment and strengthen energy security, the PIA remains a critical framework for transforming Nigeria’s vast petroleum resources into sustainable economic growth and long-term prosperity.
By Wumi Iledare, Professor Emeritus of Petroleum Economics, FNAEE