Move to unblock Nigeria’s oil sector hints at progress

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In early March, Nigeria’s President Bola Tinubu resolved one of the oil industry’s thorniest issues when he split OPL 245, a deepwater oil block at the centre of decades of corruption allegations, into four licences owned by Shell and Italian major Eni.

To outsiders this may seem like just another deal in Africa’s largest producer. But OPL 245 — one of the country’s largest deepwater reserves — has not been explored as a result of a corruption trial and allegations involving Shell and Eni, and Nigerian politicians and officials. The companies were acquitted in an Italian court in 2021.

The resolution of the OPL 245 crisis is another signal that Nigeria’s besieged oil industry is once again showing signs of life, after years of mismanagement that had threatened its viability. Signs of progress abound elsewhere. Oil production ticked up in 2024 and 2025, the two full years of Tinubu’s tenure. Nigeria produced an average of 1.5mn barrels per day last year, 8 per cent up on 2024.

It is an improvement on the gloomiest days under his predecessor, the late Muhammadu Buhari, when Nigeria’s oil production dipped below 1mn barrels per day. The industry had been buffeted by pipeline vandalism, theft, environmental pollution and distrust between host communities and the oil majors tapping their resources.

Tinubu’s government has focused on strengthening the security apparatus to clamp down on oil theft that many executives had long complained about. But for all the welcome changes, Nigeria’s oil output is still well short of its heyday two decades ago when it routinely pumped out more than 2mn barrels per day.

Clementine Wallop, director for sub-Saharan Africa at consultancy Horizon Engage, credits improvements in the oil sector in recent years to regulatory changes, such as tax breaks introduced by the Tinubu administration, an overhaul of leadership at regulatory agencies and the state-owned Nigerian National Petroleum Company (NNPC), and Tinubu’s interest in oil as a vehicle for growth. Those changes have brought about investment commitments from international oil majors that had been absent in the previous decade, she says, pointing to Shell’s billion-dollar investment in the Bonga offshore field.

“The picture is much improved, but energy officials would be the first to say there’s a way to go yet,” Wallop says. “Production progress has been much slower than hoped”. This year’s more conservative oil price prediction “pegs”, used to set the national budget, “tell their own story”, she adds. “Regulatory change is promising, but implementation is slow thanks to the many layers of middlemen. Corruption continues to plague the sector.”

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The identity of the companies pumping out Nigeria’s oil is also changing. Where once an exclusively foreign group of oil majors drilled in the Niger Delta, Nigerian companies entered the fray in recent years as international rivals withdrew from the onshore industry because of dwindling returns, theft and clashes with local communities over environmental degradation.

A cohort of local groups has emerged to buy up the assets left behind by international firms, investing billions of dollars to move up the value chain. Some of those deals include: London- and Lagos-listed Seplat acquiring ExxonMobil’s assets in Nigeria; Shell, which drilled the country’s first successful well in 1956, selling its onshore business in a $1.3bn deal; and Eni selling its Nigerian arm to Oando, listed in Lagos and Johannesburg, in a deal worth $783mn.

The changing outlook onshore has not been without complications. Chappal Energies, which bought the local operation of Norway’s state-owned Equinor for $1.2bn, including its share in one of Nigeria’s largest deepwater fields, has been in financial turmoil for months that has seen the exit of its chief executive and board chair. And while the process of approving Exxon’s asset transfer to Seplat began under Buhari, Tinubu’s government finally gave it the go-ahead after a drawn-out process.

Noelle Okwedy, an independent energy analyst, says Tinubu’s revamp of oil has made Nigeria an attractive destination again for local and foreign investors. This is crucial at a time of increased competition for investment in Africa, particularly in Angola, Ghana and Ivory Coast. Nigeria attracted about $5.3bn in upstream investment last year, compared with the same amount in the eight years to 2023 — highlighting the scale of the industry’s previous neglect.

“The reforms, especially around tax credits, were a big game changer,” Okwedy says. “The government is focusing on policy and fiscal incentives that will attract [investment] decisions from international oil companies who have competing interests.”

The success, or otherwise, of Nigeria’s oil industry is central to the cash-strapped government’s ability to raise revenues and reboot an economy showing some promise but still a laggard compared to its potential. Oil receipts contribute about 65 per cent to the government’s annual revenues and almost 90 per cent of the country’s foreign receipts, according to many estimates.

Challenges remain. In December, industry regulator the Nigerian Upstream Petroleum Regulatory Commission launched a licensing bid for 50 blocks that industry watchers say will be a test of progress. So will be investor interest in NNPC’s sales of its stake in some joint venture assets. Tinubu also signed an executive order last month that most monies received by NNPC be paid into the national account, after decades when it was allowed to collect revenues. NNPC has been accused of mismanagement and corruption for decades, often denied by the company.

Tinubu’s shake-up of the collection process could boost government finances but is already facing pushback from energy unions.

“That’s a big bet,” says Wallop of Tinubu’s proposed reform to the NNPC. “If it works, the government says there is scope for the move to supercharge revenue. If it doesn’t, revenue constraints will persist and the economic turnaround could stall.”