Nigeria’s oil and gas sector is showing signs of gradual recovery. Despite persistent production and security challenges, regulatory reforms, rising indigenous participation, and renewed investor interest are paying off, reshaping the industry.

This was disclosed by the Partner and Clients and Market Leader at PwC Nigeria, Pedro Omontuemhen, in a presentation delivered at the Lagos Chamber of Commerce and Industry (LCCI) 2026 Economic Review and Outlook Conference held recently.

Speaking on the theme, Oil and Gas Sector Performance and Outlook – Trends, Challenges and Prospects in Nigeria’s Oil and Gas Industry, he noted that while the sector continues to face structural constraints, recent policy actions and market shifts are helping to stabilise output and restore investor confidence.

According to him, Nigeria’s crude oil production averaged about 1.64 million barrels per day in 2025, representing an improvement over previous years but still below the country’s estimated production potential of over two million barrels per day.

The shortfall, he said, was due to oil theft, ageing infrastructure, operational inefficiencies and years of underinvestment across key production assets.

Omontuemhen said reforms introduced under the Petroleum Industry Act (PIA), alongside recent executive orders, have helped attract over $16 billion in new investments into the oil and gas sector. He explained that the reforms have improved fiscal clarity, strengthened regulatory oversight and encouraged greater participation by indigenous operators. However, he noted that many local operators still face funding and security challenges, particularly in onshore areas affected by crude theft and pipeline vandalism.

He said the sector’s contribution to the economy remained modest but stable, with oil and gas accounting for about 3.44 per cent of Nigeria’s gross domestic product (GDP) in the third quarter of 2025, slightly higher than the 3.38 per cent recorded in the same period of 2024.

The marginal growth, he added, was linked to firmer oil prices, improved security in some producing areas and better performance by indigenous operators.

Omontuemhen noted that global demand for petroleum products remains strong despite the energy transition, with gasoline and diesel demand projected to rise steadily through 2045. Diesel and gasoil consumption, he said, are expected to reach about 30.1 million barrels per day, underscoring the continued relevance of oil in the global energy mix.

He said Nigeria’s oil industry has undergone a major structural shift, with indigenous companies now controlling about 55 per cent of total oil production following divestments by international oil companies from onshore and shallow-water assets.

Since the passage of the PIA, he noted, more than $6 billion worth of oil and gas assets have been acquired by local firms, reshaping ownership and operational control in the sector.
Omontuemhen added that Nigeria’s refining capacity is also transforming, driven largely by the Dangote Refinery and the expansion of modular refineries.

While these developments have reduced dependence on imported petroleum products, domestic crude supply remains a challenge, with a significant portion of feedstock still sourced from overseas.

He identified deepwater projects as a key growth area, noting that offshore fields offer higher production potential and lower exposure to security risks. Projects such as Bonga North, Preowei and Owowo are expected to drive output growth, supported by improved fiscal terms and renewed investor confidence.

Despite these opportunities, Omontuemhen said challenges persist, including oil theft, vandalism, ageing infrastructure and underinvestment, which continue to constrain production capacity. He also warned that global market volatility could push oil prices down to around $61 per barrel in 2026, posing fiscal risks for Nigeria.

He added that although Nigeria holds about 33 per cent of Africa’s gas reserves, it has attracted only a small share of global oil and gas investment in recent years, underscoring the need for sustained reforms, improved security and better infrastructure.

Looking ahead, Omontuemhen said the outlook for 2026 remains cautiously optimistic, with output projected to recover towards 1.8 to 2.0 million barrels per day as security improves, investment increases, and regulatory reforms take firmer root.

He concluded that while Nigeria’s oil and gas sector continues to face structural and operational challenges, ongoing reforms, rising indigenous participation, and renewed investment interest provide a foundation for a gradual recovery, stressing that sustained policy consistency and infrastructure development will be critical to unlocking long-term growth.