Over the years, politics and corruption have significantly influenced Nigeria’s oil legislation and regulatory frameworks, shaping the sector’s trajectory and efficiency. Despite being one of the largest oil producers in Africa, Nigeria has struggled with inconsistencies in policy implementation, legal uncertainties, and regulatory inefficiencies, mainly due to political interference and corrupt practices.
The 1956 discovery of oil by Shell-BP in Oloibiri in present-day Bayelsa State sets the stage for subsequent extractive activities on commercial scales across the oil-rich Niger Delta region. The history of oil exploration and management of petroleum resources in Nigeria resonates with the challenges across sectors of the economy as well as the social and political landscapes.
The elite, however, exploited the gaps in regulatory frameworks and the failure of policies in the sector to covet economic advantage; leading to a culture of corruption that has become intensely entrenched in the society. Ingrained in the self-serving intra-class politics of the elite is the divisive agenda of prioritising the interest of multi-national oil companies and their local partners over and above the interest of the host communities.
Despite the multi-billion dollar revenues generated over five decades of a booming petrodollar economy accounting for over 85 per cent of export earnings and contributing no less than 60 per cent of annual budget revenue, host communities remain marginalised and impoverished. The 2020/2021 marginal fields bid round was no exception to the longstanding pattern of opacity and political manoeuvring that has historically defined the allocation of oil licenses to beneficial owners and contracts to key players across the upstream, midstream, and downstream sectors of Nigeria’s oil and gas industry.
This scenario aligns with the longstanding issues that have plagued the allocation of oil wells and contracts by successive governments, primarily due to a lack of transparency and accountability in the regulatory framework. The irregularities in contract awards and concessioning are further exacerbated by the failure of regulatory oversight from key institutions such as the Nigerian National Petroleum Corporation (NNPC), now the Nigerian National Petroleum Company Limited (NNPCL), the defunct Department of Petroleum Resources (DPR), now the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and other relevant agencies.
Consequently, the procedural abuses characteristic of Nigeria’s oil and gas sector were evident in the 2020/2021 marginal field bid round, ultimately undermining the core objectives of the Petroleum Industry Act (PIA) and raising concerns about the corporate integrity of the nation’s oil sector.
Shell’s decision to divest from its Nigerian onshore subsidiary, Shell Petroleum Development Company (SPDC), to Renaissance Africa Energy Company Limited for $1.3 billion raised concerns among stakeholders, particularly regarding environmental accountability. Despite these concerns, the Nigerian government approved the deal in December 2024.
Concerns over divestment amid unresolved issues
The divestment has fueled apprehensions that Shell might exit without fully addressing the long-standing environmental damage caused by its operations, especially oil spills that have severely impacted farmlands and livelihoods in the Niger Delta. While remediation efforts have commenced in some affected communities, such as Ogoni in Rivers State, many stakeholders worry about the adequacy and sustainability of these interventions.
Meanwhile, the 2020/2021 marginal fields bid round, focused on oil mining lease allocations through concessioning, unincorporated joint ventures, and production-sharing contracts has been marred by concerns over transparency. This process is emblematic of the persistent governance challenges in Nigeria’s oil sector, where issues of regulatory oversight, procedural abuse, and corporate accountability continue to undermine reforms intended by the Petroleum Industry Act (PIA).
The Human and Environmental Development Agenda (HEDA Resource Centre), in its public presentation of the publication “Marginal Fields’ Awards, Regulators’ Independence, and Environmental Injustice: Paradox of Beneficial Ownership and the Host Communities,”highlighted the evolution of Nigeria’s oil and gas regulatory framework. Before the enactment of PIA in 2021, the sector was governed by the Petroleum Act of 1969 and the Oil Pipeline Act of 1956, along with later amendments, including the Oil and Gas Pipeline Regulations of 1995. However, these laws lacked comprehensive provisions on transparency and accountability gaps that the PIA aims to address.
What does the PIA say?
The PIA introduces stringent regulations to ensure due process and transparency in the bidding process for oil blocks, particularly marginal fields (MFs). It mandates detailed requirements for their development by beneficial owners. The Act, as amended by the National Assembly, provides a clear legal framework for the acquisition of mining licenses and defines the role of regulatory bodies such as the now-defunct Department of Petroleum Resources (DPR), which was replaced by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
HEDA’s publication references Paragraph 17 (4) of the First Schedule to the Petroleum Act, which conceptualised the marginal fields programme as an initiative to enhance indigenous participation in the oil and gas sector. However, concerns persist over how the implementation of the PIA and the marginal fields bid rounds align with its core objectives, particularly in ensuring equity, transparency, and benefits for host communities.
The bid round for the 57 marginal fields spanning land, swamp, and shallow offshore terrains was declared open by the Department of Petroleum Resources (DPR) on June 1, 2020. Notably, participation was restricted to Nigerian companies with 100 per cent indigenous shareholding, aligning with the government’s objective of enhancing local participation in the oil and gas sector.
Following the award, HEDA said the re-qualified bidders were left with the option of forming a Special Purpose Vehicle (SPV) to operate the field. The SPV could mobilise financing on terms considered appropriate and suitable for the financial obligations of the awardees with the assumption that the awardees in the SPV will hold shares proportionate to the interest awarded.
To address these challenges, experts have continuously called for stronger institutional frameworks, enhanced transparency, and the politicisation of the oil sector. Implementing stringent anti-corruption measures, ensuring regulatory independence, and fostering a culture of accountability could significantly improve Nigeria’s oil governance.
While the PIA represents a step toward reform, its success largely depends on its complete and unbiased implementation. Without tackling the deep-rooted political interference and corruption issues, Nigeria’s oil sector will continue to struggle despite its vast potential.
HEDA’s publication addressed allegations regarding manipulation of the bidding process in favour of companies with limited or no experience or financial capacity but which offered kickbacks to government officials. Public trust in the bidding process was undermined to the detriment of the ideals of transparency that the PIA prioritises.
It added that political connections rather than merit play a crucial role in the bid process leading to the award of oil licenses to private companies. It noted that government officials manipulate the bidding process in favour of preferred companies that often offer bribes in return.
Chairman of HEDA Resource Centre, Olanrewaju Suraju, condemned the awarding of contracts to unregistered companies, questioning the credibility of Nigeria’s oil sector regulations.
“Of approximately 38 companies, 18 are not registered, and many have failed to file their annual returns. This is not about the supply of goods and services; we are talking about Nigeria’s main economic sector,” he said
He stressed that the failure to enforce due diligence had led to massive revenue losses for the country and called for collaboration between regulatory agencies such as the Corporate Affairs Commission (CAC), the NUPRC, and the Nigeria Extractive Industries Transparency Initiative (NEITI).
Beyond financial misconduct, Suraju warned that environmental pollution in the Niger Delta remains a pressing concern. He urged civil society, the diplomatic community, and international organisations to intervene, particularly as oil companies attempt to divest from Nigeria without fulfilling their environmental responsibilities.
Executive Secretary of NEITI, Dr Orji Ogbonnaya Orji, stressed that transparency must be accompanied by social and environmental justice.
Orji reaffirmed NEITI’s commitment to ensuring that Nigeria’s extractive sector remains a force for good, adding that NEITI would continue to advocate, monitor, and engage with stakeholders to promote transparency and accountability.
“Host communities must be protected, compensated, and empowered to benefit from the resources extracted from their land. Anything less is a betrayal of their rights and dignity,” he said.
He stressed that CISLAC, committed to promoting transparency and accountability, supported the Nigerian government in enacting legal frameworks for EITI and the PIA, which aims to enhance transparency, boost productivity, and curb corruption in the oil and gas sector, if not eliminate it.
“Oil theft has continued to undermine the effectiveness of Nigeria’s oil and gas sector. There’s no way the country can make progress when the state institutions and state officials appear to be conniving and collaborating with the saboteurs mining Nigeria’s oil and gas sector. There’s no proper regulation regarding how productive and efficient the oil and gas sector is in Nigeria, despite spending more than 50 years in the oil and gas sector operation,” he said.
He added that despite the persistent efforts of Nigerian civil society, particularly CISLAC, in advocating for PIA, which took years before being passed and signed into law, its implementation remains ineffective. This, he noted, continues to fuel corruption within the subsidy regime, as the government keeps allocating funds for petroleum imports while deliberately neglecting the country’s refineries, creating an excuse to sustain import dependency.
Energy expert, Prof. Dayo Ayoade, emphasized that the true effectiveness of any law lies in its implementation. While transparency and regulatory oversight are gradually improving, he noted that their actual impact remains uncertain. He pointed out ongoing conflicts between the two regulatory bodies, as they struggle for dominance, which continues to hinder oversight efforts. As a result, issues of transparency and corruption persist, and it may take time for regulators to establish stability.
“Well, NUPRC has only done one allocation in 2024, and in 2025 they want to do oil block allocation but these oil block allocations have been mostly directed at local companies, so, from that point of view, you could say it’s successful. But how effective has it been if you want to look at it from a point of transparency? There have always been complaints that it could be more transparent but maybe the criticism has not been as big as in previous years, maybe there is a slight improvement in transparency, so by the time they do the one in 2025, then maybe one can compare to see whether we are in an upward trajectory about effective regulatory oversight and transparency and anti-corruption,” he said.
Energy Partner at Bloomfield, Dr Ayodele Oni, told The Guardian that the overall success of the Petroleum Industry Act (PIA) would largely depend on the rigour of its implementation. He noted that while the Act has the potential to address key industry challenges, its true effectiveness can only be determined through long-term evaluation.
