Nigeria’s oil and gas sector, long the backbone of its economy, is undergoing significant changes as the world embraces renewable energy and moves away from fossil fuels. Despite being one of the largest oil producers in Africa, Nigeria faces both domestic and international pressures to adapt to the shifting energy landscape.
For decades, the country’s oil sector has been the primary driver of government revenue and foreign exchange earnings. But in recent years, fluctuating oil prices, growing environmental concerns, and the global pivot to green energy have challenged the industry’s long-term viability. To address these challenges, Nigeria has introduced an Energy Transition Plan (ETP) aimed at balancing its reliance on oil with investments in cleaner, renewable energy sources.
A central component of Nigeria’s strategy is its push towards natural gas as a transitional fuel. The government views gas as a way to bridge the gap between oil dependency and a future powered by renewable energy. Major energy players, including local companies like Seplat Energy and international giants like TotalEnergies, are leading gas-to-power initiatives to provide electricity to millions of Nigerians who currently live without reliable energy.
However, the road to energy transition is fraught with difficulties. Nigeria’s aging infrastructure, including its pipelines and refineries, suffers from years of underinvestment, oil theft, and environmental degradation from spills. While the Petroleum Industry Act (PIA), passed in 2021, was intended to bring reforms to the sector by addressing regulatory challenges and encouraging new investment, its implementation has been slower than anticipated.
Moreover, leadership in the sector has seen a shift since Timipre Sylva, the former Minister of State for Petroleum Resources, resigned in 2023 to pursue his gubernatorial ambitions in Bayelsa State. His successor, Heineken Lokpobiri, has emphasized the importance of gas as Nigeria’s future and reinforced the government’s commitment to energy transition. Lokpobiri has worked to fast-track projects that boost Nigeria’s energy infrastructure, focusing on gas processing and transportation as well as renewable energy partnerships.
Internationally, Nigeria is under pressure to reduce its carbon emissions and align with global efforts to combat climate change. This has led to increased collaboration with organizations such as the African Development Bank (AfDB) and the World Bank, both of which are supporting renewable energy initiatives through funding and technical expertise. Projects such as solar farms and wind energy developments are underway, with plans to expand these initiatives in rural areas where energy access remains limited.
Yet, Nigeria’s oil and gas industry is still crucial for the economy. Oil exports account for over 90% of the country’s foreign exchange, and many regions, particularly the Niger Delta, rely on the sector for employment. The challenge for Nigeria lies in balancing this dependence on oil with the need to diversify its energy sources and reduce environmental damage.
One of the key issues facing the industry is oil theft, which continues to drain billions from the country’s revenues. Despite efforts by the Nigerian National Petroleum Corporation (NNPC) to curb illegal bunkering and pipeline vandalism, the problem persists. As a result, Nigeria’s oil production has not met its full potential, further exacerbating the economic strain caused by lower oil prices.
In the long term, experts agree that Nigeria must prioritize energy diversification. Renewables like solar and wind hold enormous potential, particularly in the northern regions of the country where sunlight is abundant. However, these projects require significant upfront investment and a stable regulatory environment to thrive. The government’s ability to create an enabling environment for private investment will determine the success of Nigeria’s energy transition.
AJU2kobo.com view: As Nigeria navigates its energy transition, the balance between maintaining its oil-based economy and investing in cleaner, renewable energy will be critical. With global trends pushing towards sustainability, Nigeria must adapt quickly to remain competitive while securing its long-term economic future.
