Nigerian President Muhammadu Buhari has finally submitted an oil reform bill to lawmakers, which the industry has been waiting for more than a decade. The ministry of petroleum resources estimates that the delay has cost the country around $15 billion each year in lost investments.

Along with reforms being delayed, the Nigerian oil production has also declined from its 2010 peak, and gas production growth has plateaued. The bill in its current form will:

Establish an upstream regulatory commission that will recommend either assigning or revoking licenses for crude exploration to the oil minister
Contain a framework to privatize the Nigerian National Petroleum Corporation (NNPC), giving it the means to raise external funds
Reduce and streamline royalties
Increase the number of money companies pay to local communities and for environmental cleanups
Introduce new dispute-resolution mechanisms between government and oil companies
Set up a midstream government infrastructure fund

Oil and gas are vital sectors for the Nigerian economy. They generate approximately 10% of the nation's GDP and over 85% of its total export revenues. Nigeria also has around $37 billion barrels of crude oil reserves, along with over 200 trillion cubic feet of proven natural gas reserves and 600 trillion in unproven natural gas reserves.

Nigeria has Africa's largest oil and gas reserves as well. But the industry has been at risk due to poor leadership, corruption, and environmental degradation for decades. Opaque licensing deals, unaccountable middlemen, a lack of refining capacity, and graft have seen the Nigerian National Petroleum Corporation (NNPC) always leak value every year. The oil-rich Niger Delta also loses value through sabotage and pipeline theft, amounting to billions of dollars in annual revenues.

Much like other oil-producing nations, Nigeria has had to deal with a range of external factors that include:

Price and production declines in 2014/15 by OPEC to counter the US fracking industry
A surplus of supply due to the COVID-19 pandemic
Competition from renewable energy and energy transition projects for international capital
The 2020 oil price war between Russia and Saudi Arabia resulting in a sharp decline in oil prices

However, there is still hope that oil reforms will encourage investments, reduce corruption, and enable Nigeria to gain from its resources. Civil unrest has been brewing in Nigeria in recent months, so the government must bring positive economic news.

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