By Wumi Iledare
Nigeria’s national oil company has now completed a full year under its current leadership – a period that, by any fair assessment, reflects both measurable progress and stubborn structural realities.
It is important to begin with what has worked.
Crude oil production recovery to levels approaching 1.8 million barrels per day (including condensates) is not trivial. It signals some success in addressing the most immediate disruptions that plagued the system in prior years – particularly crude theft, pipeline insecurity, and shut-in capacity. There is also a discernible shift in tone within NNPCL toward commercial orientation, consistent with the intent of the Petroleum Industry Act (PIA). The language of profitability, efficiency, and value creation is no longer abstract; it is increasingly part of operational discourse.
However, progress must not be mistaken for transformation.
Much of the recent production gain is better understood as a recovery from dysfunction, not yet evidence of a structurally more efficient petroleum sector. Nigeria is still producing below its technical potential and, more importantly, above its competitive cost threshold. In today’s global energy market, volume without cost discipline is not strength – it is vulnerability.
The persistent inefficiencies in joint venture operations remain a central concern. Unlike production sharing contracts, which benefit from clearer fiscal frameworks and stronger operator discipline, JV assets continue to struggle with funding rigidity, aging infrastructure, and procurement inefficiencies. Without decisive restructuring, JV underperformance will continue to dilute the gains seen elsewhere.
On governance, there are early signs of movement in the right direction, but the journey towards a truly apolitical and commercially disciplined NNPCL is far from complete. The transformation from a state enterprise to a limited liability company is a legal milestone; institutional independence, however, is earned through consistent decision-making that prioritises economic logic over expediency. That standard is still being tested.
This is where constructive admonition is necessary. If cost efficiency does not become the central metric of performance, the current gains may prove temporary. High operating costs – driven by logistics, security, contracting practices, and low productivity – continue to erode value. In a competitive global industry, capital flows to efficiency. Nigeria cannot afford to be structurally expensive and expect sustained investment.
Furthermore, commerciality under the PIA must move beyond intent. A truly commercial NNPCL cannot simultaneously function as a profit-driven entity and a vehicle for quasi-fiscal obligations without clear compensation mechanisms. That contradiction, if unresolved, will continue to blur accountability and weaken performance.
Looking ahead, the path is clear, even if execution will be difficult.
First, the focus must shift from production volume to unit cost competitiveness. Producing more barrels is useful only if those barrels are globally competitive. Second, JV structures require deeper reform – particularly around financing autonomy, governance clarity, and operational accountability. Third, governance must be strengthened in practice, not just in design, ensuring that commercial decisions are insulated from short-term political pressures.
Ultimately, the past year should be seen as a transition phase – one that has stabilised parts of the system and signaled a new direction, but has not yet delivered full transformation.
The opportunity now is to convert early momentum into durable institutional change. If that happens, the recent improvements will be remembered as the beginning of a new trajectory. If not, they risk becoming another cycle of temporary recovery in a sector that has seen too many of them.
The difference will lie in whether reform is deepened, or merely sustained at the surface.
Iledare, PhD, PEofPE, Sr. Fellow USAEE, Fellow NAEE, is a Professor of Petroleum Economics and Policy Research
