OPINION/ANALYSIS

By Emeka Eboagwu

Part Two of a Three-Part Series Supporting the Presidential Petroleum Reform and Value Optimisation Taskforce

The first article in this series contended that Nigeria’s petroleum reform agenda must start with strengthening the operational alignment of the upstream investment cycle. Exploration should lead predictably into drilling activities, which must then transition smoothly into field development, and development should accelerate to reach production more rapidly. The proposed National Exploration and Drilling Acceleration Programme (NEDAP) was suggested/introduced as a mechanism to coordinate these stages, ensuring Nigeria’s upstream project pipeline progresses with greater discipline and speed.

However, improving operational coordination alone will not achieve the full impact of reform. Large-scale petroleum developments require significant capital investments, and the availability of financing ultimately determines whether projects advance from planning to execution. Once the upstream project pipeline is stabilised, the next crucial question becomes how Nigeria mobilises the capital needed to develop those projects.

This financial challenge is central to the mandate assigned to the Presidential Petroleum Reform and Value Optimisation Taskforce. One of its initial goals is to mobilise between five and ten billion dollars in sector liquidity. Achieving this will require more than just minor financial adjustments; it will necessitate strengthening the financial architecture through which Nigeria engages in petroleum investments.

Nigeria’s petroleum sector remains one of the most capital-intensive industries in the national economy. Deepwater developments often require several billion dollars in capital before first production is achieved. Projects currently advancing towards development demonstrate the scale of these commitments. Developments such as Bonga North, Bonga South West–Aparo, Zabazaba–Etan Project, Owowo Field and the Ubeta Gas Field represent tens of billions of dollars in potential investment.

Ensuring that these projects reach final investment decisions quickly will depend heavily on the availability of capital and the mechanisms through which that capital can be mobilised.

Historically, Nigeria has relied on joint venture financing arrangements, partner funding structures and project based lending to support upstream investment. While these mechanisms have enabled the development of major fields, they have also exposed the sector to financing constraints during periods of fiscal pressure or when global capital markets tighten.

Many petroleum producing countries have addressed similar challenges by strengthening the institutions responsible for managing national participation in petroleum investments.

In Norway, petroleum operations are conducted by Equinor, while the state’s direct financial stake in licences is managed through Petoro. Petoro oversees Norway’s national upstream investment portfolio without operating the fields themselves. This setup enables operational companies to concentrate on project execution, while the state manages its petroleum assets as a coordinated investment portfolio.

The institutional lesson from such arrangements is that robust petroleum sectors need not only capable operators but also specialised institutions that can handle the financial structure of national petroleum involvement.

Nigeria already possesses the foundations for such a system. Within Nigerian National Petroleum Company Limited, Nigeria’s upstream equity participation has historically been administered through Nigeria Upstream Investment Management Services. At the same time, operational responsibilities for exploration, drilling and production increasingly sit within NNPC Exploration and Production Limited, which functions as the upstream operating arm of the national oil company.

This evolution presents an opportunity to clarify institutional roles within Nigeria’s petroleum investment framework.

Operational decisions relating to exploration, drilling and production should reside within NEPL as the upstream operating company responsible for managing Nigeria’s participation in both joint venture and production sharing contract projects. NEPL would therefore focus on the technical execution of petroleum developments and collaboration with industry partners.

The financial management of Nigeria’s participation in petroleum investments could then evolve into a broader National Petroleum Investment Management Corporation.

Rather than functioning primarily as both an operational and administrative unit overseeing upstream projects, this institution would manage Nigeria’s petroleum investment portfolio across the value chain. Its mandate would extend beyond upstream participation to include strategic investments across gas infrastructure, midstream systems and downstream assets where the national oil company maintains commercial interests.

Such a structure would not undermine the commercial role of the national oil company. NNPCL would continue managing its assets and engaging in petroleum projects across the industry. The proposed investment management corporation would instead enhance the financial framework through which Nigeria oversees and finances its petroleum asset portfolio.

The distinction is straightforward. Operational companies execute petroleum projects. Investment management institutions structure and optimise the financial portfolio associated with those projects.

Equally important is ensuring that these reforms do not introduce additional layers of bureaucracy within the sector. Regulatory authority would remain fully within the framework established by the Petroleum Industry Act. Upstream licensing and technical oversight would continue to be administered by the Nigerian Upstream Petroleum Regulatory Commission, while infrastructure regulation across midstream and downstream segments would remain under the jurisdiction of the Nigerian Midstream and Downstream Petroleum Regulatory Authority.

Within this institutional architecture, the proposed National Exploration and Drilling Acceleration Programme and the National Petroleum Investment Management Corporation would perform complementary functions. NEDAP would coordinate the upstream project pipeline by aligning exploration programmes, drilling capacity and development timelines. The investment management corporation would provide the financial platform through which Nigeria’s participation in those projects is financed and managed.

In practical terms, policy direction would remain with the Presidency and the reform taskforce. Regulators would continue to oversee compliance and licensing. The national oil company and its subsidiaries would execute petroleum operations. The investment management corporation would mobilise capital and manage the national petroleum investment portfolio.

For this model to function effectively, the mandate of the proposed investment management corporation would need to evolve beyond the administrative functions historically performed by NUIMS.

The first step would be to clearly define the institutional relationship between the investment management corporation and the commercial subsidiaries of the national oil company. Operational execution across upstream projects would remain the responsibility of NEPL. The investment management corporation would focus on structuring financing for Nigeria’s participation in those projects.

The second step would involve consolidating Nigeria’s petroleum investment interests into a single strategic portfolio. This portfolio would include upstream equity participation, gas infrastructure investments, midstream systems and strategic assets such as Nigeria LNG Limited. Managing these interests as a coordinated portfolio would allow Nigeria to evaluate capital allocation across the petroleum value chain while optimising long term returns.

A third priority would be the development of portfolio based financing mechanisms capable of mobilising capital linked to Nigeria’s petroleum assets. Rather than relying exclusively on project specific borrowing or partner financing arrangements, the investment management corporation could structure financing instruments supported by production streams, gas supply contracts or infrastructure revenues.

Fourth, the institution would require strong governance and transparency frameworks consistent with international investment management standards. Professional oversight, independent financial governance and transparent reporting would be essential for attracting long term institutional capital.

Finally, the investment management corporation would work in close coordination with the upstream project pipeline described in the first article. While the National Exploration and Drilling Acceleration Programme focuses on accelerating exploration and development activities across Nigeria’s upstream sector, the investment management corporation would provide the financial platform through which Nigeria’s participation in those projects is financed.

The liquidity objective identified by the Presidential Petroleum Reform and Value Optimisation Taskforce therefore becomes both achievable and strategically important. Unlocking five to ten billion dollars in sector liquidity does not necessarily require new taxation or additional sovereign borrowing. It requires structuring financial mechanisms that allow Nigeria’s existing petroleum asset portfolio to support capital mobilisation.

Nigeria already possesses a successful example of how disciplined state participation in petroleum assets can generate long term value. Through Nigeria LNG Limited, the country holds a strategic equity stake alongside international partners while operational execution remains with the joint venture structure. Over several decades, this arrangement has delivered consistent revenue flows, world class project execution and sustained investor confidence.

A National Petroleum Investment Management Corporation could build on this precedent by managing Nigeria’s broader petroleum interests within a similar portfolio framework. By treating upstream licences, gas infrastructure investments and strategic assets such as Nigeria LNG as components of a coordinated national energy investment portfolio, Nigeria would be better positioned to mobilise capital, optimise asset performance and strengthen financial discipline across the petroleum sector.

If the first phase of Nigeria’s petroleum reform focused on institutional governance, the next phase must focus on financial execution. The ability to mobilise capital efficiently will ultimately determine how quickly Nigeria’s petroleum resources are translated into producing assets and long term national value.

Emeka Eboagwu, Ph. D, CMILT, fACSC, is a global social sustainability expert and energy economist based in the United Kingdom whose work focuses on petroleum sector governance, supply chain sustainability and energy policy reform.

Contact: eeeboagwu@gmail.com