Nigeria is considering a major shake-up of its oil governance framework that could fundamentally alter the balance of power in the country’s most important industry. A draft amendment to the 2021 Petroleum Industry Act (PIA), proposes stripping the Nigerian National Petroleum Company (NNPC) Limited of its authority to represent the state in petroleum contracts. That role would instead be handed to the Nigeria Upstream Petroleum Regulatory Commission (NUPRC).
If adopted, the amendment would be the most consequential revision of the PIA since it was signed into law, and it signals a shift in the Federal Government’s approach to managing oil resources. The NUPRC, which currently serves as the regulator for the upstream sector, would become responsible not only for oversight but also for negotiating production and profit-sharing agreements with international oil companies (IOCs) and domestic operators.
Blurring the lines between regulator and operator
At first glance, the move appears to be aimed at improving government revenues and tackling the opacity that has long surrounded Nigeria’s oil sector. Yet, it also raises significant questions about governance. Regulators are traditionally tasked with ensuring compliance, transparency, and fair play across the industry. Entrusting the NUPRC with both regulatory and contractual roles risks blurring the line between oversight and participation.
Such an arrangement could create conflicts of interest. A regulator negotiating contracts on behalf of the state may struggle to remain impartial when monitoring compliance with those same contracts. This dual role could weaken checks and balances, opening the door to disputes, regulatory capture, or even corruption. In effect, the watchdog could end up regulating its own work.
Erosion of NNPC’s corporate autonomy
The proposed amendment also seeks to curtail the powers of NNPC’s board, including its authority to approve budgets and set corporate strategy. For a company that was transformed into a limited liability entity just three years ago, a change that was hailed as a milestone in depoliticising the sector – this development represents a dramatic reversal.
Since its commercialisation in 2021, NNPC Limited has styled itself as a profit-driven enterprise, accountable to shareholders and committed to transparency. Its defenders argue that stripping the board of key decision-making powers undermines this model, reducing NNPC once again to a politically managed entity. Without control over budgets and strategy, the board risks becoming a rubber stamp, diminishing the company’s competitiveness and credibility in the global energy market.
The government’s rationale
The Attorney General of the Federation, Lateef Fagbemi, has defended the amendment in a letter to the gas minister. He argued that the current provisions of the PIA have enabled “statutory leakages and opaque deductions” by NNPC, which have eroded government revenues. This claim speaks to a longstanding tension: while NNPC has always insisted it operates in the national interest, critics – including past finance ministers and civil society organisations – have accused it of retaining revenues, engaging in questionable deductions, and failing to fully remit proceeds to the federation account.
The amendment, from this perspective, is an attempt to tighten government control over oil earnings, especially at a time when Nigeria faces serious fiscal pressures. Debt servicing consumes a large share of federal revenue, and oil receipts remain the single most important source of funding for the budget. With NNPC’s recent FAAC reports showing shortfalls in expected remittances and missing dividends, the government appears to be seeking a structural fix.
High stakes for Nigeria’s oil sector
The stakes could not be higher. Nigeria’s oil industry is already contending with multiple challenges: declining production due to theft and vandalism, underinvestment in upstream projects, and the looming global energy transition that threatens the long-term viability of crude exports. Stability, clarity, and confidence in governance are critical if Nigeria hopes to attract fresh investment and sustain its production base.
International oil companies, which have gradually been divesting from onshore and shallow-water assets, will likely view the proposed amendment with caution. For investors, the predictability of the legal framework is as important as the geology. If the amendment introduces uncertainty or raises fears of regulatory overreach, it could accelerate divestment trends and weaken Nigeria’s competitiveness relative to other African producers like Angola, which are seen as offering more transparent and investor-friendly regimes.
A political and institutional gamble
Ultimately, the amendment is as much a political statement as it is a governance reform. It reflects frustration within government circles over NNPC’s handling of revenues, but it also risks undermining the corporate reforms painstakingly built into the PIA. Whether this is a pragmatic correction or a step backward depends on implementation.
If the NUPRC can maintain genuine independence and establish clear Chinese walls between its regulatory and contractual functions, the risks of conflict of interest could be mitigated. But if the lines remain blurred, Nigeria could find itself with a regulator that is both player and referee – a dangerous combination in a sector that accounts for roughly 90 per cent of foreign exchange earnings.
For NNPC, the proposal represents a challenge to its newfound corporate identity. Having only recently begun to operate as a limited company with ambitions of global competitiveness, it now faces the prospect of diminished autonomy and reduced strategic influence. For the Nigerian state, the gamble is whether the shift will improve transparency and revenues, or whether it will simply re-politicise an already fraught industry.
As Nigeria debates this amendment, the underlying question is clear: does the country need stronger oversight of its oil wealth, or does it risk destabilising a fragile reform that has barely had time to take root? The answer will shape not only the fortunes of NNPC and NUPRC, but also the fiscal health of Africa’s largest economy in the years ahead.
