*And pains of subsidy removal linger
By Emeka Anaeto and Udeme Akpan
President Bola Ahmed Tinubu raised hopes when he aggressively overhauled Nigeria’s oil and gas sector through executive orders, fiscal incentives for deepwater and gas developments, and the removal of deduction powers previously exercised by NNPC Limited.
The reforms culminated in the streamlining of contracting cycles, attraction of billions of dollars in new investments, and enhanced direct oil revenue remittances as the Executive Orders mandated that all government petroleum entitlements — including royalties, tax oil, profit oil and profit gas — be remitted directly into the Federation Account.
The directives stripped NNPC Limited of deduction powers while suspending the collection of management and frontier exploration fees in a move aimed at improving fiscal transparency.
Tinubu also signed executive orders introducing fiscal incentives for non-associated gas, midstream and deepwater developments, unlocking billions of dollars in capital inflows while providing tax credits of up to 20 per cent for operators meeting cost-saving benchmarks.
To improve ease of doing business, the administration compressed petroleum sector contracting cycles to six months and reformed local content requirements to ensure they do not undermine cost competitiveness.
In March 2026, the government established the Presidential Petroleum Reform Task Force to design and sequence the next phase of structural reforms, unlock fresh capital and consolidate ongoing initiatives within the sector.
But the International Oil Companies are Exiting
However, the reforms coincided with a major wave of divestments by International Oil Companies, IoCs, to indigenous operators, accelerating the exit of multinationals from onshore and shallow-water operations while deepening focus on offshore and gas investments.
The divestment wave involved major players including Shell plc, Eni, TotalEnergies and ExxonMobil, while indigenous firms such as Oando Plc and Renaissance Africa Energy emerged as dominant buyers.
The transition marked a structural shift in ownership of Nigeria’s upstream sector, driven by security concerns, oil theft, ageing infrastructure, environmental liabilities and implementation of the Petroleum Industry Act, PIA.
Indigenous firms take centre stage
The divestment trend has fundamentally altered Nigeria’s upstream ownership structure, with indigenous operators taking control of larger portions of production assets previously managed by multinational companies.
Industry experts argued that local operators may be better positioned to manage community relations and navigate the complexities of the Niger Delta environment, although concerns remain over financing capacity, environmental remediation and operational efficiency.
The transition is also expected to test the regulatory capacity of the Nigerian Upstream Petroleum Regulatory Commission as it balances investment attraction with environmental accountability and host community expectations.
While the IoCs continue reducing exposure to onshore risks, they remain active in Nigeria’s deepwater and gas sectors, suggesting that the nation’s hydrocarbons industry is entering a new phase defined less by foreign operational dominance and more by partnerships between indigenous firms and global capital.
Crude supply to local refineries improves
The Tinubu regime has a singular privilege of birthing the first private sector investment in the refinery segment of the oil industry, and it is indigenous – Dangote Refinery.
In strong support for this ground-breaking development, the Federal Government also improved its commitment to supplying crude oil to domestic refineries, especially the Dangote Petroleum Refinery, in line with provisions of the PIA. The increase in crude allocation signalled a strategic shift by government to prioritise domestic refining capacity and reduce exposure to volatile international markets, a move industry operators believe could support gradual moderation in fuel prices if sustained. Consequently, improved domestic crude supply has enhanced the refinery’s capacity to meet local demand and export refined petroleum products to other African countries.
Oil exploration, output remain low
Despite major upstream reforms, Nigeria’s oil exploration and production performance remained weak, according to data from the Organisation of the Petroleum Exporting Countries, OPEC.Nigeria’s exploration and drilling activities declined by 41.7 per cent in April 2026 following reduced upstream operations and investment activity.According to OPEC’s May 2026 Monthly Oil Market Report, Nigeria’s rig count — a key indicator of upstream oil and gas activity — fell to 12 in April 2026 from 17 in March 2026.Earlier OPEC data also showed that Nigeria’s average rig count declined to 13 in 2025 from 15 recorded in 2024, indicating sustained weakness in exploration and drilling activities.In terms of production, OPEC stated that Nigeria has consistently struggled to meet its 1.5 million barrels per day OPEC quota, despite output increasing marginally to 1.489 million bpd in April 2026 from 1.383 million bpd in March 2026 based on direct communication data.Total petroleum liquids production, including condensates, stood at about 1.6 million bpd in April, still below the 1.84 million bpd benchmark adopted in the Federal Government’s 2026 budget.The development came despite sustained efforts by government and industry operators to ramp up production to two million bpd in order to boost revenue, strengthen foreign exchange earnings and support budget implementation.Oil theft, vandalism lingerAmidst the reforms and improved investor sentiment, the industry continued to grapple with pipeline vandalism, crude oil theft and illegal refining activities, especially in the Niger Delta.Industry operators noted that although security interventions have reduced some losses, large-scale theft and sabotage continue to undermine production growth, increase operational costs and discourage fresh upstream investments.The persistence of illegal refining activities also continues to create severe environmental damage across oil-producing communities.Gas flaring continues despite rising outputIn Tinubu’s three years, Nigeria’s gas sector recorded improved production and utilisation levels, although gas flaring remained a significant environmental and economic challenge despite ongoing reforms by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).Data from the NUPRC Gas Production Status Report showed that gas production remained strong in early 2026, supported by increased upstream activities and improved field performance.The increase reflected stronger contributions from associated and non-associated gas assets as operators intensified production to meet export obligations, domestic industrial demand and power sector requirements.NUPRC data also showed that gas utilisation remained high, continuing the trend established in 2025 when utilisation exceeded 90 per cent of total production.The Commission attributed the improvement to increased gas commercialisation efforts, expansion of domestic gas supply obligations and improved infrastructure utilisation.However, despite higher utilisation levels, gas flaring persisted across several upstream producing assets.According to NUPRC statistics, Nigeria flared more than 203.9 billion standard cubic feet of gas in 2025, with flaring continuing into 2026 largely because of inadequate gas gathering systems, infrastructure gaps and operational constraints in some producing fields.The Commission stated that associated gas produced alongside crude oil accounted for much of the flared volumes, especially in fields where evacuation and processing facilities remain insufficient.Industry stakeholders argued that the persistence of flaring highlights the contradiction within Nigeria’s gas sector, where rising production and utilisation coexist with substantial waste of valuable gas resources.They noted that although Nigeria possesses one of Africa’s largest gas reserves, infrastructure limitations continue to constrain optimal monetisation opportunities.
Downstream, a mix-bag of joy and pain
Nigeria’s downstream petroleum marketing industry has undergone a monumental structural transition since mid-2023 when Tinubu took over, shifting from a heavily subsidised, state-controlled model to a deregulated, market-driven environment. While this transition has improved supply availability and eliminated long fuel queues, it has introduced extreme price volatility against consumers and severe margin pressures for marketers.
The elimination of the decades-long Premium Motor Spirit (PMS) subsidy in mid-2023 dramatically altered the commercial landscape.
However, pump prices surged from around N195 per litre to well over N800 before the US/ Israeli war with Iran pushed it to N1,330 presently, directly affecting consumer purchasing power.
Despite higher revenue streams, retail margins have come under immense pressure due to hyperinflation, foreign exchange (FX) fluctuations, and rising logistics costs, which often outpace pump price adjustments.
The sudden price hikes caused a noticeable dip in aggregate national PMS consumption, shifting consumer behaviour towards public transit and alternative energy sources.
Despite attempts to liberalise the importation of petroleum products, the state-owned Nigerian National Petroleum Company Limited (NNPCL) has largely remained the major importer and supplier of last resort. Private marketers have faced severe challenges securing the necessary US Dollars to fund independent importation, forcing them to rely heavily on NNPCL as their primary wholesaler.
The industry’s reliance on 100% imported refined products has started to change with the rise in domestic refining, most notably with the operational debut of the 650,000-barrel-per-day Dangote Refinery in Lagos.
Failed promises
President Tinubu had in 2023, promised to turn around the oil and gas industry for sustainable development, stressing the need to increase crude oil production because of revenue and other considerations.
He said: “Now, our nation struggles to meet our OPEC production quota due, primarily, to ongoing oil theft and pipeline vandalism. While a few malefactors have profited from these illegal activities, the economy and welfare of the average person has suffered.
Government’s ability to pursue needed growth-related projects and policies has been hampered by the resultant loss of revenue.
Conclusion
Data obtained from the NUPRC and OPEC showed that Nigeria’s petroleum industry witnessed a gradual turnaround after years of declining output and weak refining performance.
However, while reforms under the Tinubu administration have improved investment sentiment, accelerated indigenous participation and strengthened domestic refining, the sector still faces deep-rooted structural problems including oil theft, vandalism, inadequate infrastructure, weak exploration activity and persistent gas flaring.
Analysts said sustaining reforms, improving security, expanding infrastructure and ensuring regulatory stability would be critical if Nigeria hopes to fully unlock the economic potential of its vast oil and gas resources.
Despite the progress, the monkey on the back of the Tinubu administration are the government-owned refineries which were reported to have been revitalised and already producing products, only for the refineries to be shut weeks after. Worse, the administration is set to invite foreigners to come and help revive it again.
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