‘How funding challenge threatens Nigeria’s $1.5bn gas export revenue target’

Analysts have described funding as the major challenge mitigating against Nigeria’s realisation of its gas potential, amidst the transformation the oil and gas sector is experiencing, driven by the government’s efforts to attract foreign investment and leverage the country’s vast gas reserves to drive economic growth. A major milestone in this journey is the recent […]

Analysts have described funding as the major challenge mitigating against Nigeria’s realisation of its gas potential, amidst the transformation the oil and gas sector is experiencing, driven by the government’s efforts to attract foreign investment and leverage the country’s vast gas reserves to drive economic growth.

A major milestone in this journey is the recent Gas Sales and Purchase Agreement signed with Shell, TotalEnergies, and Eni, securing 270 million standard cubic feet per day to power the proposed $3.5 billion Brass Fertiliser and Petrochemical Plant in Bayelsa State.

This agreement is, among other things, expected to generate $1.5 billion in annual export revenues and marks a significant step towards realising Nigeria’s gas potential.

At the recent NOG Energy Week 2024, a panel session titled; “Accelerating Investment, Enabling Industry Growth, Meeting Energy Demand,” laid out a pragmatic roadmap for the country’s energy future, exposing Nigeria’s evolving strategy to unlock capital, de-risk investments, and scale infrastructure across gas and deepwater oil to public scrutiny.

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Critically, this renewed investment appetite is underpinned by fiscal recalibration. In the same month, the federal government approved a strategic package of incentives, including VAT waivers on gas, diesel, electric vehicles, clean cooking solutions, and tax credits for new investments in deepwater oil and gas.

Daily Trust reports that the tax exemptions were contained in: Value Added Tax (VAT) Modification Order 2024; as well as Notice of Tax Incentives for Deep Offshore Oil & Gas Production, by the Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024.

The VAT Modification Order 2024 introduces exemptions on a range of key energy products and infrastructure including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment as part of move to curb the gale of divestments by IOCs.

These reforms directly address legacy investor concerns around cost structure and regulatory fluidity, positioning Nigeria’s deep offshore and gas basins as increasingly investible frontiers.

However, analysts say that despite the progress made, Nigeria’s gas sector faces several challenges that need to be addressed to ensure the successful implementation of the Gas Sales and Purchase Agreement.

 

What analysts are saying?

Petroleum policy analyst Adebayo Alamutu highlighted the challenges to include funding. According to Alamutu, infrastructure projects and upstream development require significant funding, adding that encouraging private sector participation and foreign direct investment remains a priority.

Stating that oil price volatility is also a challenge, the expert noted that global oil prices fluctuate due to geopolitical factors, affecting Nigeria’s revenue. “Diversifying the energy mix and improving domestic refining can help stabilise earnings,” he said.

His view was corroborated by an oil and gas policy researcher, Dr. Adeola Yusuf, who added that environmental concerns are also a part of the challenges facing the country’s upstream development, which indirectly affects the annual gas export revenue projection by the government.

“Greenhouse gas emissions from Nigeria’s oil sector continue to pose sustainability challenges. Strengthening regulations and investing in clean energy initiatives will be key to balancing growth with environmental responsibility. Aside from this, there is also an issue around the infrastructure deficits.

“Nigeria’s gas infrastructure is still developing, and significant investment is needed to ensure a reliable and efficient gas supply to meet growing demand,” Dr. Yusuf said.

To address these challenges, the Nigerian government must be committed to implementing strategic initiatives to attract foreign investment into its gas sector, they said.

Professor of Petroleum Economics, Wumi Iledare, speaking on the sidelines of a conference in Abuja on solutions to these challenges, stated that fiscal recalibration is number one on the list.

He said, “The government has approved a strategic package of incentives, including VAT waivers on gas, diesel, electric vehicles, and clean cooking solutions, and tax credits for new investments in deepwater oil and gas. It needs to follow all these through to a point of success.

“The government has been paying commendable attention to gas infrastructure development, and it needs to do more. By this, I mean the government is investing in critical gas infrastructure projects, such as the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline, which will enhance domestic gas utilization and support economic growth.”

On regulatory frameworks as a solution, Dr. Adeola Yusuf added, “The Petroleum Industry Act and other regulatory frameworks are being implemented to support the development of the gas sector and attract investment. Beyond this, there is a need for more Public-Private partnerships.

“The government is promoting partnerships between public and private stakeholders to effectively fund and execute infrastructure projects and this is exemplified by the Gas Sales and Purchase Agreement with Shell, TotalEnergies, and Eni, which presents significant opportunities for Nigeria’s economic growth and development.

“Some of the potential benefits include increased revenue. The agreement is expected to generate $1.5 billion in annual export revenues, contributing to Nigeria’s economic growth.

“Another area is job creation. The Brass Fertiliser and Petrochemical Plant is expected to create employment opportunities for Nigerians, both directly and indirectly. It is also envisaged to boost economic diversification through the development of the gas sector, which will contribute to Nigeria’s economic diversification efforts, reducing dependence on oil exports.

“One other important aspect of this is energy security. The agreement will enhance Nigeria’s energy security by increasing the availability of gas for power generation and industrial use.

The Gas Sales and Purchase Agreement signed with Shell, TotalEnergies, and Eni, according to industry watchers, marks a significant milestone in Nigeria’s journey to unlock its gas potential.

While challenges exist, the government’s strategic initiatives and enabling policies are designed to address these challenges and attract foreign investment into the gas sector. With the potential to generate significant revenue, create jobs, and contribute to economic diversification, the agreement presents a compelling opportunity for Nigeria’s economic growth and development.

They stated that as stakeholders look ahead to NOG Energy Week 2025, the focus should be on implementation, financing models, and technological innovations to drive Africa’s energy transformation.