Nigeria’s Energy Sector Poised for Major Transformations in Q1 2025
The Society of Energy Editors (SEE) has forecasted significant developments in Nigeria’s energy sector during the first quarter of 2025, spurred by President Bola Tinubu’s proposed ₦49.7 trillion national budget for the year. The budget’s ambitious targets, including boosting crude oil production and curbing inflation, are expected to drive impactful changes across oil exploration, domestic refining, gas production, and power generation.
In its report, Nigeria Energy Outlook Q1 2025, the SEE identified key areas of focus, outlining challenges, opportunities, and critical actions required to achieve success in the sector.
Ambitious Crude Oil Production Targets
The proposed budget aims to increase Nigeria’s base crude oil production to 2.06 million barrels per day, a significant leap that could stabilize inflation, projected to drop from 34.6% in 2024 to 15% in 2025. However, the SEE cautioned that achieving this target will depend heavily on resolving security challenges in the oil-rich Niger Delta region.
The government also plans to hold a fresh oil licensing round in 2025, targeting undeveloped blocks to bolster crude reserves and output. However, the SEE warned that strong political will and decisive actions would be necessary to make this licensing round a reality.
Domestic Refining and Dangote Refinery’s Role
A pivotal moment for the downstream sector is the expected commencement of operations at the Dangote Refinery. The refinery, once operational, is projected to significantly reduce Nigeria’s dependence on imported petroleum products and ease the fiscal burden of fuel subsidies. In 2024 alone, Nigeria spent ₦9.176 trillion on petrol imports, a sharp 60.87% increase from the ₦5.704 trillion spent in 2023.
The SEE emphasized that the steady supply of crude oil feedstock by NNPC Ltd. to the refinery will determine its overall impact on the economy in 2025. If managed efficiently, this development could mark a turning point in Nigeria’s domestic refining capacity and energy security.
Gas Sector Growth and LNG Export
Nigeria’s gas sector is set for expansion, driven by the government’s “Decade of Gas” initiative and plans to increase gas reserves to 210 trillion cubic feet (Tcf) by 2025 and 220 Tcf by 2030. According to the SEE, gas production and supply will grow as efforts intensify to meet shortfalls in power generation and industrial demands, while also advancing the use of gas as an alternative fuel for automobiles.
The report also projected steady liquefied natural gas (LNG) exports through Nigeria LNG Limited in the first quarter, underscoring the importance of maintaining strong production and export frameworks.
Power Sector: Challenges and Renewable Opportunities
Nigeria’s power generation and transmission sectors will remain a focal point in Q1 2025, with efforts directed at expanding generation capacity and improving the national grid’s resilience. The SEE highlighted the weakness of the current infrastructure, which recorded 12 grid collapses in 2024, warning that similar incidents could recur without significant mitigation measures.
However, the government’s push for renewable energy sources as part of the energy mix offers a glimmer of hope. Expanding the share of renewables, such as solar and wind, could reduce grid reliance and foster sustainability in the sector.
Labour Relations and Stability
Labour concerns in both the petroleum and electricity sectors could pose challenges in the coming months. The SEE urged the government to proactively engage with unions to address grievances and avoid disruptions that could derail progress in the energy sector.
Broader Challenges and Opportunities
While optimistic about the potential for growth, the SEE cautioned that achieving the government’s goals, such as reducing inflation and stabilizing the exchange rate, will be difficult given current economic realities. Security and socio-economic development in the Niger Delta region, facilitated by the Niger Delta Development Commission (NDDC), will be critical to addressing underlying causes of instability.
In addition to oil and gas, the solid minerals sector presents opportunities for revenue growth and job creation. However, the government must address the challenges of artisanal mining and ensure sustainable practices to unlock the sector’s full potential.
Setting the Tone for 2025
The SEE concluded that Q1 2025 will be pivotal for setting the tone for Nigeria’s energy sector in the year ahead. Effective implementation of policies and initiatives will be essential to overcoming challenges and leveraging the sector’s vast potential for economic transformation.
As Nigeria enters 2025 with bold plans and high expectations, the government’s ability to navigate the complexities of the energy sector will determine the success of its broader economic goals.
Source: Society of Energy Editors (SEE)
