Nigeria’s energy sector received a significant boost in 2024, with a total of $6.7 billion in investments, according to the “Presidency Energy Sector Wrap-Up 2024,” a comprehensive report released by the Office of the Special Adviser to the President on Energy.

The report highlighted that of the total investment, $5.5 billion was channeled into the oil and gas sector, $400 million was allocated to the Presidential Metering Initiative (PMI), and $700 million was directed toward clean mobility and clean cooking projects.

Oil and Gas Sector Dominates

The oil and gas sector emerged as the primary beneficiary, securing $5 billion of the total investment through Shell Nigeria Exploration and Production Company’s (SNEPCO) Bonga North Deep Offshore Project. This marks the first greenfield deep offshore project in over a decade, with the potential to increase Nigeria’s oil production capacity by approximately 110,000 barrels per day.

The report also listed five major acquisitions in the sector:

1. Renaissance Consortium’s Acquisition of Shell Petroleum Development Company (SPDC): A $1.3 billion deal.
2. Seplat Energy Plc’s Acquisition of Mobil Producing Nigeria Unlimited (MPNU): A $1.3 billion transaction with ExxonMobil Corporation.
3. Chappal Energies’ Purchase of Equinor Nigeria Energy Company (ENEC): A $1.2 billion deal with Norway’s Equinor ASA.
4. Chappal Energies’ Acquisition of TotalEnergies’ 10% Stake in SPDC JV Licenses: Valued at $860 million.
5. Oando Plc’s Acquisition of the Nigerian Agip Oil Company (NAOC): An $800 million agreement.

These transactions underscore renewed investor confidence in Nigeria’s oil and gas sector.

Presidential Metering Initiative and Clean Energy Investments

In addition to oil and gas, the federal government allocated $400 million to the Presidential Metering Initiative, which aims to improve on-grid power availability, affordability, and reliability. Olu Verheijen, the President’s special adviser on Energy, emphasized the administration’s commitment to energy reform.

“We launched, among other interventions, the new Presidential Metering Initiative (PMI). Our goal, working with all industry stakeholders across public and private sectors, is to improve the availability, affordability, and reliability of on-grid power,” Verheijen stated.

A further $700 million was directed toward clean energy initiatives, focusing on clean mobility and clean cooking, aligning with Nigeria’s long-term energy transition goals.

The report noted that Nigeria achieved a landmark by receiving the highest upstream oil and gas investments in Africa in 2024, accounting for four of the five major investments on the continent.

“In the Oil & Gas sector, 2024 was a year of bold reforms that improved Nigeria’s investment competitiveness,” the report stated.

Nigeria’s Missed LNG Opportunities

Nigeria, despite its vast natural gas reserves, has failed to fully capitalize on its liquefied natural gas (LNG) potential, a situation that has significantly undermined its oil and gas revenue streams. Energy experts are increasingly critical of the government’s inability to meet the Nigeria LNG Limited (NLNG) requirement for 3.5 billion standard cubic feet of gas daily.

Currently, Nigeria’s capacity utilization stands at a dismal 65%, a figure projected to drop further to 44% with the commissioning of the NLNG Train 7 project in 2025.

The Train 7 expansion, expected to raise Nigeria’s LNG installed capacity from 22 million tons per annum (mta) to 30 mta, now risks becoming a monument to missed opportunities. Since October 2022, Nigeria has operated under a state of force majeure, a direct consequence of its chronic inability to meet gas supply obligations.

Energy analysts attribute Nigeria’s failures to a lack of foresight, poor policy frameworks, and chronic mismanagement of its oil and gas sector. Kelvin Emmanuel, an energy analyst, noted the government’s failure to develop a fiscal framework to attract international investments, particularly for deep water fields under production-sharing contract (PSC) models.

“The government’s failure to provide a fiscal framework for deep water fields that fall under the production-sharing contract model has limited institutional-level investments from International Oil Companies (IOCs) interested in participating in the global ramp-up of gas as a transition fuel,” Emmanuel explained.

Emmanuel contrasted Nigeria’s stagnation with global trends, highlighting how nations like the United States have surged ahead in the LNG market. In 2011, the U.S. and Russia were nearly tied, contributing approximately 18–19% of global LNG output. However, by 2025, the U.S. is projected to hold a commanding 26% share of global LNG production, while Russia will drop to 14%, hindered by geopolitical tensions and sanctions.

The U.S.’s dominance in the global oil and gas market is further bolstered by its massive natural gas production capacity of 79.8 billion standard cubic feet daily, derived from its 13.3 million barrels of crude oil. Meanwhile, Nigeria struggles to meet its domestic and international obligations, failing to position itself competitively in the global energy transition.

The Impact of Global Oil Price Volatility

Emmanuel also raised concerns about global oil price dynamics. The U.S., under policies initiated by former President Donald Trump, is planning to add another 3 million barrels of crude oil per day to global markets, a move likely to depress prices further.

This development poses a significant risk to Nigeria, which has based its 2025 budget on an oil price benchmark of $75 per barrel. Emmanuel warned that the government might be forced to present a supplementary budget by Q2 if oil prices fall below this threshold.

“Russia has practically lost out because most of its LNG shipments are sold at an extra premium by third parties to avoid sanctions,” Emmanuel said. “Oil prices are definitely coming back down, and the President needs to revise his benchmark OSP of $75 for 2025 or prepare for a budgetary shortfall.”

A Call to Action

Emmanuel said that Nigeria must shift its focus to gas as a transition fuel, aligning with global trends and the G-7 communique emphasizing the importance of natural gas in the energy transition.

“The government must wake up from its slumber and finally join the global race to turn Nigeria into a gas nation,” he urged.

The NLNG Train 7 project, once seen as a game-changer, now risks becoming a symbol of Nigeria’s inability to leverage its natural resource wealth.

However, the report projected that the country could attract over $5 billion in gas investments by 2029, enhancing gas availability for export and supporting the global energy transition. Additionally, it anticipates Nigeria tapping into more than $30 billion in deep offshore investments within the same period.

“We will continue engaging, collaborating, and communicating with stakeholders across the energy sector and welcome your feedback and comments,” Verheijen said.

The Nigerian government reported a Value Added Tax (VAT) revenue of N1.78 trillion for the third quarter of 2024, marking a significant achievement in its revenue generation efforts.

This figure, disclosed in the latest VAT report by the National Bureau of Statistics (NBS), represents a 14.16% increase from the N1.56 trillion collected in the previous quarter and an impressive 88% growth compared to the same period in 2023.

The Breakdown of VAT Revenue Sources and Sectoral Contributions

The revenue generated in Q3 2024 was driven by three primary streams: local VAT payments, foreign VAT payments, and import VAT collections. Local VAT payments contributed the highest share, followed by foreign and import VAT, reflecting the diverse economic activities taxed across the country.

The N1.78 trillion VAT revenue was driven by contributions from three key streams:

• Local VAT Payments: N922.87 billion
• Foreign VAT Payments: N448.85 billion
• Import VAT: N410.62 billion

The manufacturing sector emerged as the largest contributor to the VAT pool, accounting for a significant portion of the total revenue. This was followed closely by the information and communication sector, as well as mining and quarrying activities. At the other end of the spectrum, activities of households as employers, extraterritorial organizations, and water supply and waste management recorded the lowest contributions.

While some sectors demonstrated remarkable growth, such as human health and social work activities, which saw a quarter-on-quarter growth rate of 250.39%, others experienced sharp declines. Water supply and waste management, for instance, suffered a steep drop of 41.92%, reflecting disparities in the growth and contraction of various industries within the economy.

In terms of contributions to the overall VAT pool, the top-performing sectors in Q3 2024 were:

• Manufacturing: 22.21%
• Information and Communication: 20.89%
• Mining and Quarrying Activities: 18.90%

The Debate Over Tax Reforms Bills

The increase in VAT revenue coincides with a heated debate over how these funds should be allocated between the federal and state governments. Currently, VAT revenues are distributed based on a formula that grants 15% to the federal government, 50% to the states, and 35% to local governments. Additionally, 4% of collections are allocated to the Federal Inland Revenue Service (FIRS) as a collection fee, while the Nigeria Customs Service receives 2% for import VAT collections.

A proposed reform to adopt a derivation-based model, which would allocate VAT revenues based on where they are generated, has sparked controversy. Northern states, supported by their governors and traditional rulers, have opposed the move, arguing that it would disproportionately favor economically vibrant Southern states. Proponents of the reform, however, contend that it would incentivize states to enhance their economic productivity and reduce dependence on federal allocations.

Public Sentiment: It’s Not About Paying Taxes, But How They’re Used

This substantial rise in VAT collections highlights the government’s success in expanding its tax base and strengthening compliance mechanisms. However, the achievement comes along with growing public frustration over the perceived mismanagement of tax revenues, as Nigerians increasingly demand transparency and accountability in the use of public funds.

Nigerians, by and large, do not oppose paying taxes. Many recognize the necessity of taxation as a means to fund critical public services, infrastructure, and national development. However, the real issue lies in the judicious use of taxpayers’ money, which remains a contentious topic.

The recurring narrative of corruption, embezzlement, and financial mismanagement has eroded public trust in the government’s ability to use tax revenues responsibly. Over the years, high-profile corruption scandals have emerged, implicating government officials in the diversion of funds meant for healthcare, education, and infrastructure projects. From inflated contracts to outright diversion of funds, the misuse of tax revenues has created a vicious cycle of distrust, non-compliance, and inefficiency.

This pervasive corruption has created a disconnect between citizens and the government, with many questioning why they should continue to pay taxes when basic amenities remain inaccessible or underfunded.

The lack of visible impact from tax revenues has left many Nigerians skeptical about the government’s fiscal priorities.

This mistrust is further compounded by Nigeria’s rising public debt, which has reached an alarming N142 trillion. Despite the increased tax revenues, the government’s reliance on borrowing has not abated, raising questions about where these funds are being channeled and whether they are effectively addressing the nation’s pressing challenges.