The Problem
Africa's largest oil producer faces an existential choice. Despite generating US$45.6 billion in 2022 from its 37.1 billion barrels of proven reserves, Nigeria's oil industry has failed its people spectacularly. While oil accounts for 90% of exports and 65% of government revenue, the World Bank reports 39% of Nigerians live below the poverty line—with the highest concentration in oil-producing regions—while the industry's wealth remains concentrated among the top 1%. Oil sector corruption has siphoned an estimated US$300 to 400 billion since 1960.
Should Nigeria stand behind an industry that seems to only benefit 1% of the population?
Nowhere is the collateral damage of a poorly run oil industry more evident than in the Niger Delta. Environmental damage has devastated local agriculture, pushing youth unemployment to 40% and leaving 11.5 million people facing respiratory diseases and contaminated water. The region's protests against these conditions have been met with significant repression, most notably in 1995 when nine Movement for the Survival of the Ogoni People (MOSOP) activists, including Ken Saro-Wiwa, were executed for opposing Shell's environmental destruction—an act that led to international outrage and a US$15.5 million settlement in 2009.
Foreign control remains entrenched in Nigeria's oil industry. Four companies—Shell, ExxonMobil, Chevron, and Total—control almost all of crude oil production, yet invest insignificant amounts in local refining capacity. The result: Nigeria, producing 1.8 million barrels daily, must import 99% of its refined petroleum at premium prices.Â
This colonial-era trade pattern—exporting raw materials and importing finished goods at markup—continues to drain the nation's wealth.
The environmental toll has been catastrophic. Nearly 10,000 oil spills in the past decade have devastated the Niger Delta, destroying 7,400 km2 of rainforest and decimating local fishing and farming. The number of oil spills in the region averages one every other day, and just a single spill can destroy an entire year's harvest, threatening the livelihoods of 30 million residents.Â
For decades, the oil conglomerates responsible for the devastation have largely escaped accountability. Despite regulations like the Petroleum Industry Act (PIA) 2021, enforcement remains weak due to insufficient resources, corruption, and the significant economic and political influence of these companies. Legal proceedings are often delayed or obstructed, and communities struggle to obtain fair compensation. For example, in the case of Shell in Bayelsa State, despite numerous spills and environmental damage, the company has faced limited legal repercussions. The cost of cleaning up the spills is estimated at US$12 billion over 12 years. However, Shell settled the lawsuit for only US$80 million and has refused to get clean-up efforts independently verified. According to locals, significant pollution remains. Their actions have left the Niger Delta as one of the most polluted regions in the world.
Perhaps unsurprisingly, the corruption that has led to sustained environmental damage and to the development of an industry that only serves 1% of the population, has led to the decline of the oil sector in recent years. Production has dropped from 2.5 million barrels daily in 2013 to 1.2 million in 2023, driven by aging infrastructure—86% is over 20 years old—and rampant oil theft costing US$2 billion monthly. Foreign investors are retreating, with US$17 billion divested since 2006 as they pivot toward sustainable energy.Â
Heavy security presence has often led to conflicts with local communities, exacerbating tensions and contributing to a cycle of violence. The militarization of the industry, evidenced by Nigerian National Petroleum Corporation (NNPC's) US$73 million security spending between 2019-2021, further signals its unsustainability. Oil companies usually hire private military contractors to protect their assets, counter protests, and defend against violence from competitors.Â
Ironically, the very issues brought upon by oil production, have contributed to the decline of the industry. All signs point towards a necessary change.
The Path Forward
Nigeria’s oil industry will not disappear overnight. While it mostly benefits the 1%, it still employs many people and drives the country’s exports. The solution is to make sure that there are legal systems in place to keep the oil industry accountable for environmental destruction, stop wealth inequality enabled by corruption, and reinvest oil revenues into welfare and innovation.
Nigeria could strengthen anti-corruption agencies like the Economic and Financial Crimes Commission (EFCC) and Independent Corrupt Practices and Other Related Offences Commission (ICPC), following successful models from India, Hong Kong, and Estonia. India's targeted anti-corruption measures alone eliminated 110 million ghost beneficiaries from government schemes, saving the country US$40 billion over the past 10 years.
Additionally, a just transition would account for the employment in this sector and transform it towards developing a future-looking industry that capitalizes on existing expertise, such as critical minerals or renewable energy.
Nigeria's exceptional solar radiation (5.5 kWh/m2/day) could generate 210 GW using just 1% of suitable land. Combined with 27.5 GW of hydro potential, renewables could meet 60% of energy demand by 2050. This transition could create 340,000 jobs by 2030, provide electricity to the 40% of Nigerians without power, and reduce carbon emissions by  65%.
Although oil exports have a US$10-40 billion export value, investments in renewables could help reduce internal energy costs. Oil is currently a third of Nigeria’s total energy supply, but the share of that which is domestically refined is only 1%. Doing a quick cost analysis, the cost of crude oil in Nigeria in January 2025 is approximately ₦113,449 per barrel. However, the cost of fuel oil used in power plants is ₦229,049 per barrel, a 102% premium. Renewable energy would also help decrease the overall cost of energy, better enabling the government to end US$2 billion in electricity subsidies.Â
Additionally, renewable energy would help with energy reliability. Nigeria, with 12,500 MW of installed capacity, produces only a quarter of that, leaving electricity reliability below 15%. Many rely on costly diesel generators. Distributed renewable generation, such as solar PV and wind turbines, offers redundancy and improves system reliability by reducing transmission losses. The World Bank's DARES project aims to provide electricity access to over 17.5 million Nigerians with 1,225 mini-grids and 1 million standalone solar systems, enhancing grid resiliency and reducing diesel reliance. This can improve reliability, support economic growth, and make power more affordable for Nigerians.
The global energy transition offers timely support. COP29's US$300 billion climate financing commitment for developing nations by 2035, coupled with examples from other OPEC nations—UAE's US$54 billion renewable investment in 2023 and Saudi Arabia's 50% renewable electricity goal by 2030—shows the way forward.
Nigeria must act now, or risk staying perpetually behind.
Nigeria's oil sector expertise and workforce can be pivotal in the global energy transition, particularly in the critical minerals sector. The country's experience in exploration, extraction, and refining can be leveraged to meet the rising global demand for minerals like lithium, cobalt, and rare earth elements, which are essential for renewable energy technologies and electric vehicles. The global demand for these minerals is projected to grow significantly, with lithium demand rising by 30%, and cobalt, nickel, graphite, and rare earth elements seeing increases ranging from 8% to 15%.Â
The country's mineral wealth, valued at over US$700 billion, positions it among the top global players in the energy sector Nigeria is known to have significant deposits of these minerals, particularly lithium and cobalt, which are crucial for EV batteries.The Ministry of Solid Minerals Development is actively promoting these minerals for domestic industrialization and foreign investment. Investing in training and technology transfer could help Nigeria develop a robust critical minerals industry.Â
Oil dependency has created a legacy of corruption, environmental destruction, and inequality. The path to prosperity lies in purging corruption and embracing sustainable investment—before the opportunity for transformation slips away. Nigeria's ability to adapt to this changing landscape will determine whether it emerges as a leader in sustainable development or remains trapped in the constraints of oil dependency.
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