For decades, Nigeria’s oil and gas sector has served as the economic lifeline of the country. With petroleum accounting for the bulk of government revenue and export earnings, the sector has long been viewed as both a blessing and a burden. Despite its immense potential, the industry has been plagued by inefficiencies, regulatory overlap, corruption, and declining investment. Recognizing the need for reform, the Nigerian government passed the Petroleum Industry Act (PIA) in August 2021, marking one of the most significant overhauls of the sector in the nation’s history.
The journey toward the PIA was a long and difficult one. For over two decades, successive administrations attempted to reform the petroleum sector without success. Previous legislation, such as the Petroleum Act of 1969, was outdated and ill-equipped to address the realities of a modern energy landscape. In that vacuum, the oil and gas industry operated under a complex web of policies and agencies with overlapping functions, creating uncertainty for investors and inefficiencies in governance. The PIA sought to break that cycle and usher in a new era of transparency, accountability, and competitiveness.
At its core, the Petroleum Industry Act introduced sweeping changes to the legal, fiscal, and institutional framework of the oil and gas sector. One of its most significant reforms was the creation of two new regulatory bodies: the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). These agencies replaced and streamlined the functions of previous regulators, with NUPRC overseeing upstream operations such as oil exploration and drilling, while NMDPRA supervises midstream and downstream activities including refining, gas processing, and distribution. This separation of roles was designed to enhance regulatory efficiency and reduce bureaucratic delays.
Another major feature of the PIA was the transformation of the Nigerian National Petroleum Corporation (NNPC) into a fully commercial entity known as NNPC Limited. Previously, NNPC operated as a government corporation with mixed regulatory and commercial responsibilities, often criticized for opacity and inefficiency. Under the new law, NNPC Limited is incorporated under the Companies and Allied Matters Act (CAMA) and is expected to operate as a profit-driven company. Although it remains fully government-owned for now, the restructuring aims to position it for future investment opportunities and even potential public listing on the stock exchange.
Fiscal reform is another pillar of the Act. The PIA replaces the previous complex tax regime with a more investor-friendly system, including lower royalty rates and a simplified structure for hydrocarbon tax and corporate income tax. These changes are especially relevant for offshore and frontier basin exploration, where high costs had previously discouraged investment. By making fiscal terms more predictable and competitive, the PIA is expected to attract fresh capital into Nigeria’s oil and gas projects, which have suffered from declining foreign interest in recent years.
A particularly notable and often debated provision of the PIA is the establishment of the Host Communities Development Trust (HCDT). For many years, oil-producing communities, particularly in the Niger Delta—have borne the environmental and social costs of oil extraction with minimal benefit. This has led to frequent unrest, sabotage, and shutdowns of production facilities. The HCDT seeks to address these issues by mandating that oil companies allocate 3% of their annual operating expenditure in the host area to a trust fund dedicated to community development. While this is a positive step toward inclusion and social investment, many community leaders have criticized the percentage as inadequate, arguing for a higher share of the revenues. Others have expressed concerns about the potential for mismanagement of the funds at the local level.
The broader goal of the PIA is to revitalize the petroleum industry and ensure that it remains a central pillar of Nigeria’s economy even as the global energy landscape shifts. In theory, the law sets the stage for improved transparency, better community relations, stronger institutions, and more efficient resource management. It promises a sector that is more attractive to investors and less vulnerable to corruption and mismanagement.
However, passing the law was only the first step. The real challenge lies in its implementation. Many of the structures and institutions created by the PIA are still being operationalized, and early signs suggest that the road ahead may be bumpy. The transition of NNPC into a commercial entity, for instance, will require a cultural shift in how the organization operates, one that may not come easily. Likewise, ensuring effective coordination between the new regulators and preventing overlapping responsibilities will require continued political will and administrative discipline.
In addition, the Act’s limited attention to renewable energy development has raised questions about Nigeria’s readiness for the global energy transition. As countries around the world reduce their dependence on fossil fuels, Nigeria must consider how its petroleum-focused economy will adapt. While the PIA does promote gas development as a transitional fuel, it lacks a broader framework for integrating renewables and building a resilient, diversified energy system.
In conclusion, the Petroleum Industry Act represents a bold and long-overdue reform of Nigeria’s oil and gas sector. It offers a chance to correct many of the structural issues that have held the industry back for years. If implemented effectively, the PIA could usher in a more transparent, efficient, and investor-friendly oil and gas industry, while also improving conditions in host communities. Yet, the success of the Act will depend not only on legal reforms but on the integrity, commitment, and collaboration of all stakeholders involved. In this sense, the PIA is not an endpoint but a foundation on which Nigeria must now build.
