Financial Energy Review
…….by Ben Ndubuwa…..
In a keynote address at the Executive Session of the Energy Institute Nigeria (EIN) and the Nigerian Association of Petroleum Explorationists (NAPE), Mrs. Olu Arowolo Verhijen, Special Adviser to the President on Energy, emphasized the critical role of energy investment in unlocking Nigeria’s economic potential. The session, held at the Eko Hotel and Suites in Victoria Island, Lagos, brought together top industry leaders and stakeholders to discuss strategies for achieving sustainable energy growth in Africa.
Opening her remarks, Mrs. Verhijen highlighted the timeliness of the event’s theme, Unlocking Investment for Africa’s Energy Future: Strategies for Sustainable Growth. “Energy, in its many forms, is a vital path to higher-paying jobs, industrialization, innovation, and sustained prosperity,” she said. “This is not just a Nigerian issue, but an African one.”
Verhijen, who has been in her role for 18 months, outlined the government’s commitment to reforming Nigeria’s energy sector to attract both domestic and international investment. She emphasized the importance of energy in driving economic development, stating that a well-developed energy sector could elevate Nigeria’s standing as an investment hub on the continent and globally.
The Path Forward: A Strategic Vision for Energy Reform
The Special Adviser explained the overarching strategy guiding the government’s approach to the oil and gas sector. At the core of the strategy, she noted, is a disciplined focus on producing oil and gas with the strongest economics and lowest emissions. She stressed the urgency of this approach, saying, “The energy transition is accelerating, and we must keep pace with it.”
Verhijen also discussed the emphasis on capital efficiency, quicker project paybacks, and a shift toward gas as a more resilient energy source during the transition. She said, “Greater emphasis must be placed on shorter-cycle projects with quicker returns. We must be laser-focused on capital efficiency and execution, ensuring value creation at every step.”
Security and Regulatory Reforms
In her address, Mrs. Verhijen outlined key actions the government had taken to foster a conducive environment for investment. A major concern, she noted, had been the security challenges affecting onshore oil and gas operations. In collaboration with the Office of the National Security Adviser (ONSA) and key industry operators, the government developed targeted security directives that helped improve operations along the Tran Niger Pipeline (TNP), which had previously been hampered by security issues.
“We worked with the ONSA and operators to develop data-driven, targeted security measures that have directly improved uptime on the Tran Niger Pipeline,” Verhijen explained. “Today, all operators along the TNP can produce into this major trunkline, contributing to the reliability of Nigeria’s energy supply.”
Alongside security, Verhijen emphasized efforts to clarify the regulatory framework governing the upstream, midstream, and downstream sectors. She stated that the government’s commitment to a stable, transparent regulatory environment was crucial in improving investor confidence. “We needed to address the bottlenecks that had previously hindered investment in key projects,” she said.
Fiscal Incentives: Attracting Global Capital
A significant portion of Verhijen’s address focused on the fiscal reforms that have been put in place to enhance Nigeria’s competitiveness in the global energy market. Following a post-PIA (Petroleum Industry Act) analysis, the government identified the need for more competitive incentives in deepwater oil and non-associated gas (NAG) projects. In response, President Bola Ahmed Tinubu’s administration issued several directives to create an attractive fiscal environment for investors.
These incentives, according to Verhijen, were designed to balance the interests of the government and investors. “We adopted a careful, output-based incentive structure that aligns with Nigeria’s fiscal policy and ensures that the government’s revenue is protected while offering attractive terms for investors,” she explained.
One of the key reforms, Directive 40, outlines incentives for onshore and shallow water NAG, as well as midstream gas investments. In addition, Directive 41 and 42 focus on streamlining project execution by reducing contracting timelines, eliminating intermediaries that contribute to Nigeria’s 40% cost premium, and increasing the threshold for NNPC approval.
The government also took steps to remove the Value Added Tax (VAT) on the sale of feed gas, liquefied petroleum gas (LPG), compressed natural gas (CNG), and mini LNG, alongside related production and processing equipment. “These measures are designed to remove barriers to investment and ensure that Nigeria’s energy infrastructure can support the needs of both the domestic and global markets,” she added.
Early Successes and Future Expectations
Reflecting on the progress made since the reforms were launched, Verhijen cited several successes. Notably, the government achieved a Final Investment Decision (FID) on the Ubeta Non-Associated Gas project in April 2024, a breakthrough for a project that had been in limbo since its discovery in 1965. “The Ubeta field has finally been unlocked, bringing with it the potential for significant economic impact,” Verhijen said.
She also highlighted the country’s success in developing a competitive fiscal framework for deepwater oil, which has helped position Nigeria among the top three countries in terms of return on investment for deepwater oil projects. “We have moved from the bottom quartile to the top three of 13 indexed countries,” she said proudly. “This has opened the door for accessing $90 billion in financing for deepwater projects globally.”
Looking ahead to 2025, Verhijen expressed optimism about the future of Nigeria’s energy sector. “The momentum is building. Our reforms are creating a virtuous cycle where new investments lead to better infrastructure, which in turn attracts even more investments,” she said.
The government’s efforts to unlock deepwater resources, she added, could unlock as much as 1.3 billion barrels of oil equivalent (boe) from five major projects, further strengthening Nigeria’s position in the global energy market.
The Economic Impact of Energy Reforms
The Special Adviser also underscored the broader economic implications of these energy investments. She explained that the expected influx of foreign capital would bolster Nigeria’s foreign exchange reserves, support exchange rate stability, and contribute to macroeconomic stability. “Each new investment in the energy sector creates jobs, stimulates local economies, and fosters skill-building and technology transfer,” Verhijen stated.
She also pointed out that the infrastructure being developed would lower future project costs and increase profitability, reinforcing the government’s vision of a self-sustaining energy sector. “The investments we are attracting will ensure that subsequent projects can be developed at lower costs and with greater returns,” she added.
A Call to Action
In closing, Mrs. Verhijen invited stakeholders to be active participants in the energy revolution taking place in Nigeria. “We cannot succeed without your support,” she said. “We want to work with partners who believe in Nigeria’s potential and are committed to our shared vision of a thriving energy sector.”
She ended her address with three key insights into the administration’s reform agenda: a strong vision for the future, a focus on long-term thinking and human capacity, and a commitment to transparent and consistent communication with investors.
As Nigeria looks to the future with an eye on energy sustainability and growth, Mrs. Verhijen’s call for a united effort in the energy sector is clear. With the right strategies in place, Nigeria is poised to become not only a leading energy producer in Africa but a global force in the industry.
