In a recent statement that has sparked widespread discussion across Nigeria’s political and economic spheres, former Vice President Atiku Abubakar has issued a stern warning to the Federal Government of Nigeria regarding proposed amendments to the Petroleum Industry Act (PIA) and plans to divest significant equity stakes in joint ventures within the nation’s oil and gas sector. The caution, shared via a post on his official social media handle on Monday, underscores the delicate balance the government must strike to maintain investor confidence, ensure energy security, and preserve public trust in one of Nigeria’s most critical industries.
Atiku’s remarks come at a pivotal moment for Nigeria, a nation whose economy has long been tethered to the fortunes of its oil and gas sector. The former vice president, a seasoned politician and businessman with deep insights into Nigeria’s economic landscape, emphasized the need for a cautious and transparent approach to any reforms in the sector. His warning highlights the potential risks of hasty policy changes, which could destabilize an already fragile industry, erode investor confidence, and jeopardize Nigeria’s energy security. In his words, “The moves, if not properly managed, could erode public trust, destabilize the sector, and compromise our energy security.”
The Petroleum Industry Act: A Landmark Reform Under Scrutiny
The Petroleum Industry Act, signed into law in August 2021, was heralded as a transformative piece of legislation aimed at overhauling Nigeria’s oil and gas sector. For decades, the sector had been plagued by inefficiencies, corruption, and a lack of regulatory clarity, which deterred investment and hampered growth. The PIA sought to address these challenges by introducing a comprehensive framework to govern the industry, streamline operations, and attract both domestic and foreign investment.
Key components of the PIA include the establishment of two regulatory bodies: the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). These institutions were designed to enhance transparency, accountability, and efficiency in the upstream, midstream, and downstream segments of the oil and gas value chain. The PIA also introduced measures to improve fiscal terms, promote local content, and create a more competitive environment for investors.
The passage of the PIA was a hard-fought victory, following nearly two decades of legislative debates and delays. It was seen as a critical step toward modernizing Nigeria’s oil and gas sector and aligning it with global best practices. However, barely four years after its enactment, reports of potential amendments to the PIA have raised concerns among stakeholders, including Atiku, who fear that premature changes could undermine the gains achieved thus far.
Atiku’s call for caution reflects a broader sentiment within Nigeria’s energy sector. The PIA, while not perfect, was intended to provide a stable and predictable regulatory environment. Any move to amend the act without broad consultation and careful consideration could send mixed signals to investors, who are already wary of Nigeria’s regulatory uncertainties. Atiku stressed that reforms must be approached with transparency and inclusivity, involving all relevant stakeholders—government agencies, industry players, local communities, and civil society—to ensure that national interests are safeguarded.
Divestment Plans and Their Implications
In addition to his concerns about PIA amendments, Atiku also cautioned against plans to divest major equity stakes in joint ventures within Nigeria’s oil and gas sector. Joint ventures between the Nigerian National Petroleum Corporation (NNPC) and international oil companies (IOCs) such as Shell, Chevron, ExxonMobil, and TotalEnergies have been a cornerstone of Nigeria’s oil industry for decades. These partnerships have enabled Nigeria to leverage the technical expertise and financial resources of global energy giants while retaining significant control over its natural resources.
However, recent years have seen a wave of divestment announcements by IOCs operating in Nigeria. Companies like Shell and ExxonMobil have expressed intentions to sell their onshore and shallow-water assets, citing challenges such as regulatory uncertainty, security risks, and a global shift toward cleaner energy sources. These divestments are part of a broader trend in the global energy sector, where companies are reallocating capital to renewable energy projects and low-carbon technologies in response to climate change pressures and evolving market dynamics.
Atiku’s warning highlights the potential risks of these divestments, particularly if they are not carefully managed. The sale of equity stakes in joint ventures could have far-reaching implications for Nigeria’s oil production capacity, government revenue, and energy security. For instance, poorly structured divestments could lead to a loss of technical expertise, reduced investment in critical infrastructure, and disruptions in oil production. Moreover, the entry of new players into the sector—particularly smaller, less experienced firms—could exacerbate operational challenges if proper oversight is not in place.
The former vice president’s concerns are supported by findings from the International Energy Agency (IEA), which noted in a recent report that Nigeria’s oil production has been declining at an average rate of 5 percent annually since 2019. The IEA attributed this decline to several factors, including regulatory uncertainty, inadequate infrastructure, and security challenges in the Niger Delta region. The report emphasized that policy consistency and a stable regulatory framework are critical to reversing this trend and attracting the investments needed to boost production.
Atiku’s call for broad stakeholder engagement underscores the need for a collaborative approach to managing divestments. He advocated for a transparent process that involves consultations with industry experts, community leaders, and other stakeholders to ensure that divestments align with Nigeria’s long-term energy goals. Such an approach, he argued, would help mitigate risks and maximize the benefits of any asset transfers.
The Global Context: Lessons from Other Markets
Nigeria’s situation is not unique. Across the globe, oil-producing countries are grappling with similar challenges as they navigate the transition to a low-carbon future while maximizing the value of their hydrocarbon resources. Atiku’s reference to global trends, such as Keppel Infrastructure’s recent sale of a 10 percent stake in MET Group to focus on renewable energy, highlights the broader shifts occurring in the energy sector. As major oil companies pivot toward cleaner energy sources, countries like Nigeria must adapt to changing market dynamics while ensuring that their oil and gas sectors remain competitive.
The experiences of other oil-producing nations offer valuable lessons for Nigeria. For instance, Norway has successfully managed its oil and gas resources through a combination of strong regulatory frameworks, transparent governance, and strategic investments in renewable energy. The country’s sovereign wealth fund, built on oil revenues, has become a global model for resource management. Similarly, the United Arab Emirates has diversified its economy by investing heavily in renewable energy and tourism, reducing its dependence on oil.
In contrast, countries like Venezuela serve as a cautionary tale. Once one of the world’s top oil producers, Venezuela’s oil industry has collapsed due to mismanagement, corruption, and political instability. The country’s failure to maintain investor confidence and implement sound policies has led to a sharp decline in production and economic devastation.
Nigeria stands at a crossroads. The decisions made in the coming years will determine whether the country can harness its vast oil and gas resources to drive sustainable development or whether it will succumb to the pitfalls of policy missteps and regulatory uncertainty. Atiku’s warning serves as a reminder of the stakes involved and the need for a strategic, forward-thinking approach to managing the sector.
Balancing Reform, Revenue, and Energy Security
The debate over PIA amendments and divestments reflects the complex interplay of competing priorities in Nigeria’s oil and gas sector. On one hand, the government is under pressure to generate revenue to address fiscal challenges, including a growing budget deficit and external debt obligations. On the other hand, it must ensure energy security by maintaining stable production levels and investing in infrastructure to support domestic energy needs.
The oil and gas sector remains a critical driver of Nigeria’s economy, accounting for over 80 percent of export earnings and a significant portion of government revenue. However, the sector’s contribution to GDP has been declining in recent years due to lower production levels and global oil price volatility. The government’s push for reforms, including potential amendments to the PIA, is driven by the need to address these challenges and create a more attractive investment climate.
However, as Atiku pointed out, poorly conceived reforms could have unintended consequences. For instance, changes to the PIA that alter fiscal terms or regulatory structures could deter investors who have already committed significant capital to Nigeria’s oil and gas sector. Similarly, divestments that prioritize short-term revenue generation over long-term stability could weaken the industry’s foundation.
Energy security is another critical consideration. Nigeria’s domestic refining capacity remains limited, despite the recent operationalization of the Dangote Refinery, Africa’s largest. The country continues to rely heavily on imported petroleum products, which places a strain on foreign exchange reserves. Any disruptions in oil production or divestments that reduce output could exacerbate this challenge, leading to higher fuel prices and economic instability.
Atiku’s call for a measured approach reflects the need to balance these competing pressures. By engaging stakeholders and prioritizing transparency, the government can develop policies that promote investment, enhance energy security, and maximize revenue without destabilizing the sector.
The Path Forward: Recommendations for Nigeria’s Oil and Gas Sector
To address the concerns raised by Atiku and other stakeholders, the Federal Government must adopt a strategic and inclusive approach to managing reforms and divestments in the oil and gas sector. Several key steps can help achieve this goal:
Stakeholder Engagement: The government should establish a platform for dialogue with all relevant stakeholders, including IOCs, local operators, community leaders, and civil society organizations. This will ensure that reforms and divestments reflect the interests of all parties and align with national priorities.
Policy Consistency: Maintaining a stable and predictable regulatory environment is critical to attracting investment. Any amendments to the PIA should be carefully considered and subjected to rigorous consultation to avoid disrupting ongoing projects.
Transparency in Divestments: The government should implement clear guidelines for divestments, including requirements for due diligence, environmental assessments, and community engagement. This will help mitigate risks and ensure that new operators are capable of maintaining production levels.
Investment in Infrastructure: To address the decline in oil production, the government should prioritize investments in critical infrastructure, such as pipelines, storage facilities, and security systems in the Niger Delta. This will enhance operational efficiency and reduce losses due to vandalism and theft.
Diversification and Energy Transition: While oil and gas remain vital to Nigeria’s economy, the government must accelerate efforts to diversify the energy mix. Investments in renewable energy, such as solar and wind, can reduce dependence on hydrocarbons and position Nigeria as a leader in the global energy transition.
Capacity Building: To ensure that divestments do not lead to a loss of technical expertise, the government should invest in training programs for local operators and workers. This will build a skilled workforce capable of managing Nigeria’s oil and gas assets effectively.
Conclusion
Former Vice President Atiku Abubakar’s caution against amending the Petroleum Industry Act and divesting equity stakes in Nigeria’s oil and gas sector serves as a timely reminder of the challenges facing one of Nigeria’s most critical industries. As the government navigates the complex terrain of reform, revenue generation, and energy security, it must adopt a cautious and transparent approach to avoid destabilizing the sector and eroding investor confidence.
The PIA, a landmark piece of legislation, was designed to bring clarity and accountability to Nigeria’s oil and gas industry. Any changes to the act must be carefully considered to preserve its gains and ensure that it continues to serve as a foundation for growth. Similarly, divestments must be managed strategically to maximize benefits while minimizing risks to production and energy security.
By engaging stakeholders, prioritizing transparency, and investing in infrastructure and diversification, Nigeria can strengthen its oil and gas sector while positioning itself for a sustainable energy future. Atiku’s warning underscores the importance of these principles, reminding policymakers and industry players alike that the decisions made today will shape the nation’s economic trajectory for years to come.
