THE MAJOR DEVELOPMENT IN THE ENERGY SECTOR AND ITS RIPPLE EFFECT ON THE ECONOMY: A FOCUS ON NIGERIA

Investing in Nigeria energy sector

INTRODUCTION: Investing in Nigeria energy sector

The energy sector, which affects not only industrial development but also national policy and global geopolitical dynamics, is closely linked to economic growth and advancement. Global energy trends, such as the switch to cleaner energy, technological advancements, and changes in market structures, have brought both opportunities and difficulties in recent years, especially for resource-rich nations like Nigeria.

Investing in Nigeria energy sector presents unique challenges and opportunities that stakeholders must navigate.

Nigeria’s energy industry is going through revolutionary changes at home, which will have a big impact on the country’s governance and economy. In order to give local companies more authority over national resources, International Oil Companies (IOCs) are selling off their historic onshore and shallow-water holdings.

A new strategic direction in national oil policy is also indicated by the changes in leadership at the Nigerian National Petroleum Company Limited (NNPC Ltd).

The proposed sale of ExxonMobil’s assets to Seplat Energy, the sale of Shell Petroleum Development Company’s (SPDC) assets to the Renaissance consortium, and the recent changes in NNPC leadership are the three main events that are most likely to influence Nigeria’s energy future. These occurrences have important ramifications for regulatory development, energy security, and economic diversification.

The Energy Transition and Decarbonization: ( Investing in Nigeria energy sector )

The global push for decarbonization, driven by the UN Sustainable Development Goals and the Paris Agreement, has led to massive investments in clean energy. For the first time, investments in clean energy technologies surpassed those in fossil fuels, with over $1.7 trillion invested globally in 2023 alone (IEA, 2023).

With major economies setting ambitious net-zero targets (e.g., EU by 2050, China by 2060), countries are gradually moving away from fossil fuels and toward renewable energy. Oil-dependent countries like Nigeria must diversify immediately in light of this development, which signals long-term risks to export earnings.

2. Technological Innovations and Climate Finance:( Investing in Nigeria energy sector )

Energy delivery is being revolutionized by green hydrogen, carbon capture and storage (CCS), smart grids, and battery storage. Climate finance is expanding at the same time, giving nations like Nigeria access to green funding for renewable energy initiatives. For instance, the Nigeria Electrification Project (NEP), which encourages off-grid and solar mini-grid systems, received $750 million from the World Bank.

3. Oil Market Volatility and Strategic Shifts:( Investing in Nigeria energy sector )

Geopolitical events like the conflict between Russia and Ukraine have caused volatility in oil prices, highlighting the susceptibility of global supply chains. Nigeria is immediately affected financially by this. Nigeria was compelled to devalue its currency, make budgetary changes, and incur substantial debt when oil prices dropped below $20 per barrel during the COVID-19 pandemic in 2020. The event demonstrated Nigeria’s heavy reliance on global oil market stability.

4. Rising Global Demand for Gas as a Transition Fuel:( Investing in Nigeria energy sector )

Natural gas is being embraced globally as a cleaner substitute for coal as many nations cut back on their use of it. Nigeria, which has the ninth-largest gas reserves in the world, stands to gain. Nigeria is now positioned as a potential gas hub, provided that infrastructure catches up with policy ambitions, thanks to the proposed Nigeria-Morocco Gas Pipeline and the EU’s renewed interest in African gas (post-Russia).

Developments in Nigeria’s Energy Sector

The Petroleum Industry Act (PIA) 2021

The PIA is a historic reform that aims to transform Nigeria’s oil and gas industry by enhancing investor confidence, governance, and transparency. By establishing regulatory organizations like the Midstream and Downstream Authority and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), it set the stage for a more accountable and competitive energy landscape.

Gas-Focused Policies: The Decade of Gas Initiative

Nigeria declared the 2020s to be the “Decade of Gas,” emphasizing domestic use and infrastructure development. The Nigeria Gas Expansion Programme’s (NGEP) primary goals are power generation, compressed natural gas (CNG), and LPG adoption. Nigeria has an opportunity to realign itself with this strategy, which is consistent with the global shift toward gas.

Renewable Energy Momentum

Nigeria’s electrification gap, particularly in rural areas, is being filled by projects such as the Nigeria Electrification Project (NEP), the Solar Power Naija Program, and other private-sector solar initiatives. Nigeria’s Energy Transition Plan (ETP), which emphasizes renewable energy sources, aims to achieve net-zero emissions by 2060 and offers a road-map for reaching 100% electricity access by 2030.

Strategic Shifts in Nigeria’s Energy Sector: ExxonMobil, Shell Divestment, and NNPC Leadership Transition

The energy sector, which affects not only industrial development but also national policy and global geopolitical dynamics, is closely linked to economic growth and advancement. Global energy trends, such as the switch to cleaner energy, technological advancements, and changes in market structures, have brought both opportunities and difficulties in recent years, especially for resource-rich nations like Nigeria.

The Nigerian National Petroleum Company Limited (NNPC), Shell, Chevron, and TotalEnergies are just a few of the domestic and international companies that have historically played a significant role in the country’s energy system. These companies pay billions in taxes, royalties, and infrastructure development. A calculated step toward openness and operational effectiveness was taken in 2022 with the commercialization of NNPC. Joint ventures supported by Shell, Total, and NNPC, like Nigeria Liquefied Natural Gas (NLNG), continue to create a significant amount of foreign exchange and job opportunities. Additionally, these organizations promote corporate social responsibility, environmental preservation, and the creation of local content. Nigeria’s appeal to investors who care about the environment is further increased by its slow adoption of international ESG standards. But the industry continues to face persistent problems like oil spills and civil unrest, which calls for strict regulatory oversight.

In the midst of these dynamics, the nation’s energy sector is going through radical changes, such as the International Oil Companies’ (IOCs) divestiture of legacy onshore and shallow-water assets and the emergence of local companies taking over. At the same time, changes in NNPC Ltd.’s leadership are indicating changes in the country’s energy strategy. This article focuses on three major developments: the proposed divestment of ExxonMobil’s assets to Seplat Energy, Shell Petroleum Development Company (SPDC)’s asset sale to the Renaissance consortium, and the recent changes in NNPC leadership. These events are pivotal in shaping Nigeria’s energy future and will influence economic diversification, energy security, and regulatory evolution.

ExxonMobil Divestment to Seplat Energy: ( Investing in Nigeria energy sector )

Seplat Energy Plc declared in February 2022 that it would buy Mobil Producing Nigeria Unlimited (MPNU), which would give it access to ExxonMobil’s shallow-water assets in Nigeria. Offshore oilfields and infrastructure that produce about 95,000 barrels per day are part of the deal, which is estimated to be worth $1.28 billion.

Regulators have, however, delayed the divestment. Citing unresolved legal, environmental, and operational issues, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) first refused to approve the deal. Regulators and executive authority engaged in a tug-of-war after the Presidency later seemed to endorse the deal. The agreement is still awaiting final approval as of early 2025.

Economic Implications on the Nigerian Economy: ( Investing in Nigeria energy sector )

Boost to Local Content: An important milestone in Nigeria’s local content development strategy is the $1.28 billion purchase of ExxonMobil’s shallow-water assets by Seplat Energy, one of the biggest by an indigenous company, which marks a move toward greater domestic involvement in the oil and gas industry. Policies designed to improve the local supply chain and support a competitive local market demonstrate Seplat’s dedication to local content. Since 2010, the company has spent more than $64 million on projects related to environmental stewardship, infrastructure development, healthcare, education, and economic empowerment. Furthermore, according to Seplat, more than 98% of its workers are Nigerian, exceeding the local employment requirements set by the government. It is anticipated that this acquisition will increase national technological capacity, encourage the use of local contractors and goods, and further boost employment opportunities in the area. The agreement supports the government’s goals to guarantee that Nigerians profit from the nation’s natural resources by bringing more Nigerians into the oil and gas value chain.

Operational Risks: Seplat Energy faces operational difficulties as a result of the acquisition, even though it also offers growth prospects. It takes a lot of financial resources and technical know-how to manage established oil fields, especially when it comes to decommissioning aging infrastructure. In order to increase production capacity and strengthen its position in Nigeria’s energy market, Seplat intends to revitalize old oil wells that it purchased from ExxonMobil. The company projects a 148% increase in daily production to more than 200,000 barrels and an 86% increase in its proven and potential reserves to 887 million barrels of oil equivalent. However, there are serious risks because of the cost of decommissioning and environmental cleanup. Strong risk management plans and a sizable capital investment will be needed to manage possible liabilities from previous operations and ensure compliance with environmental regulations.

Policy Signal: Concerns regarding regulatory efficiency and transparency in Nigeria’s oil and gas industry are highlighted by the lengthy approval process for the ExxonMobil-Seplat deal, which took more than two years. The delay has brought attention to the intricacies and uncertainties that may put off potential investors, and it has been ascribed to a number of regulatory obstacles and worries about environmental liabilities.

When compared to other oil-producing nations with more efficient approval procedures, Nigeria may become less appealing to investors as a result of this regulatory opacity. Nigeria must resolve these regulatory issues by making sure that asset transfers and other crucial energy-related transactions are conducted in a clear, consistent, and effective manner in order to increase its competitiveness and draw in foreign investment.

Revenue Generation and Fiscal Benefits: Seplat will be able to increase production and export thanks to the acquisition, which will result in a sizable increase in foreign exchange profits. Because of better reporting and more efficient operations, increased domestic control over oil assets may result in higher government tax revenues and royalties.

Employment and Skills Development: Indigenous ownership is frequently accompanied by a greater dedication to hiring local talent. Jobs from field operations to administrative and technical positions are anticipated to be created by Seplat’s expansion. In host communities, this can lower unemployment and promote the development of human capital.

Increased Investor Interest in Indigenous Firms: A successful deal would show how capable Nigerian energy companies are becoming, which might entice more institutional and private investors to support regional businesses. This could stimulate the larger financial sector by opening the door for capital market activities like bond issuances or public offerings.

In Conclusion, although the ExxonMobil divestment to Seplat Energy has the potential to increase local content and indigenous involvement in Nigeria’s oil and gas sector, it also highlights important operational and regulatory issues that need to be properly handled in order to fully reap the rewards of the deal.

Shell (SPDC) Divestment to Renaissance Consortium ( Investing in Nigeria energy sector )

A consortium called Renaissance, which consists of ND Western, Aradel Holdings, Waltersmith, First E&P, and Petrolin, will purchase Shell’s 30% interest in SPDC’s onshore joint venture, the company announced in January 2024. After years of coping with legal issues, sabotage, and environmental liabilities in the Niger Delta, Shell has formally withdrawn from onshore operations in Nigeria. 18 onshore and shallow water oil and gas leases are part of the deal, which is valued at over $2.4 billion. Shell will continue to hold its stake in the Nigeria Liquefied Natural Gas (NLNG) project and offshore assets.

Economic Implications on the Nigerian Economy: ( Investing in Nigeria energy sector )

Decentralized Ownership: Wider stakeholder inclusion results from the divestment, which makes it easier for a group of independent Nigerian companies to acquire strategic oil assets from a multinational. More community-focused investment strategies are made possible by this decentralized ownership structure, which encourages grassroots involvement. Because Nigerian-owned businesses frequently have closer ties to their communities, they may be able to implement customized CSR programs, better infrastructure, and sustainable development initiatives. Additionally, through local hiring procedures, supply chain involvement, and youth skill development initiatives, such ownership can promote job creation in host communities.

Liability Transition: In addition to the potential for increased accountability and environmental rehabilitation, the transfer of SPDC’s onshore operations to the Renaissance consortium also raises questions about the consortium’s financial and technical capacity to meet these obligations, including the need for effective oversight by regulatory bodies like NOSDRA and NUPRC to ensure compliance and prevent additional environmental degradation or social unrest in affected communities. Additional environmental and asset abandonment responsibilities include remediation of oil spills, restoration of degraded land, and proper decommissioning of obsolete facilities.

Operational Flexibility: Native companies like those in the Renaissance consortium might be more nimble in adapting to the changing demands of Nigeria’s onshore environment than big IOCs. These difficulties include disruptions in logistics, security risks, and pipeline vandalism. Local businesses can implement context-specific security measures, interact with community stakeholders more successfully, and modify operations with fewer levels of bureaucracy. Because they are close to the problems, decisions can be made and implemented more quickly, which can result in less downtime, lower operating costs, and increased production reliability.

Change in NNPC Leadership: ( Investing in Nigeria energy sector )

Reorganized in 2022 under the Petroleum Industry Act (PIA), NNPC Limited is still moving toward becoming a business-driven organization rather than a government-owned one. Mele Kyari was replaced as NNPC Limited’s Group Chief Executive Officer (GCEO) in April 2025 by Bashir Bayo Ojulari, who was appointed by President Bola Ahmed Tinubu. Under the direction of Bashir Bayo Ojulari, the recently hired Group Chief Executive Officer (GCEO), the Nigerian National Petroleum Company Limited (NNPC Ltd) undertook a major organizational restructuring as of April 30, 2025, only 27 days have passed since former GCEO Mele Kyari’s departure. Ojulari views this massive reorganization as a calculated move to bring NNPC Ltd.’s operations into line with the administration of President Bola Tinubu’s larger goals, which include increasing operational effectiveness, regaining investor trust, and promoting gas commercialization and diversification.

Given that some of the impacted individuals were approaching retirement and were given early exit packages, some insiders characterize the changes as routine, while others see them as a conscious attempt to disassociate the company from the influence of the previous leadership. The hiring of new staff members, like Obioma Abangwu as Chief Liaison Officer for board matters and Maryam Idrisu as Managing Director of NNPC Trading, suggests a change in operational focus under Ojulari’s direction. This development emphasizes how NNPC Ltd. is constantly changing and how dedicated it is to adapting to the changing energy landscape in Nigeria.

Economic and Policy Implications on the Nigerian Economy ( Investing in Nigeria energy sector )

Strategic Continuity vs. Disruption: The possibility of strategic innovation is presented by the leadership change, but there is also a chance that policies will be disrupted. NNPC reported its first profits during Mele Kyari’s tenure, and the company became more aligned with the Extractive Industries Transparency Initiative (EITI). If not handled carefully, an abrupt change in leadership could stall current reforms or slow the pace of commercialization.

Investor Confidence and Industry Perception: Ojulari’s international experience and background in the private sector could boost investor confidence, especially among foreign stakeholders who value leadership with a global perspective. Markets may become uneasy, though, if sudden changes in leadership are perceived as politically driven rather than merit-based. Investors leery of regulatory uncertainty may also be alarmed by Kyari’s dismissal, as he was credited with designing important reforms.

Possible Quickening of Gas and Energy Transition Objectives: The government’s objective to boost gas production and create cleaner energy plans is in line with Ojulari’s appointment. His previous work experience at Shell may help with initiatives to expand gas infrastructure and draw in foreign partners. However, reaching ambitious goals—like raising oil production to 3 million barrels per day and gas production to 10 billion cubic feet per day by 2030—will necessitate not only strong leadership but also structural advancements in infrastructure, security, and policy enforcement.

Governance and Political Oversight Risks: A change in leadership calls into question NNPC Ltd’s independence from political meddling. Kyari’s replacement by a presidential appointment could erode perceptions of institutional autonomy, which could deter long-term investment and impede the larger objective of depoliticizing the oil and gas sector. Commercialization under the PIA was intended to protect the company from executive control.

Organizational Culture and Talent Retention: The leadership transition may affect internal morale and corporate culture. Staff who supported Kyari’s vision might face uncertainty under new management. Important operational decisions may be postponed if Ojulari decides to keep top executives or seek a thorough management change.

In conclusion, there are risks associated with institutional stability, regulatory certainty, and investor trust even though the NNPC Ltd. leadership change offers chances for expanded strategic direction, transparency, and energy diversification. Ojulari’s ability to build on earlier reforms while promoting a believable and coherent vision for Nigeria’s energy future will determine how well this transition goes.

Implementation of the Upstream Petroleum Decarbonisation Template (UPDT)

The Nigerian government, through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), has started implementing a new regulatory framework called the Upstream Petroleum Decarbonization Template (UPDT) in keeping with its goal of having net-zero carbon emissions by 2060.

All new applicants for oil exploration, production licenses, field development plans, and operating permits must now provide the following documentation as of January 1, 2025:

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