The Nigerian government is aiming to double Economic Growth in 2025, targeting a 7% annual GDP increase through higher oil production and greater Private Sector involvement. Finance Minister Wale Edun stated in a recent television interview that the country expects improved Revenue growth, a rise in crude output, and cost savings from subsidy removal to drive economic expansion. According to him, achieving this level of growth is necessary to lift Nigerians out of poverty. However, Nigeria’s economic trajectory remains tied to oil, its primary foreign exchange earner, making increased production critical to the government’s ambitious plans.
Efforts to ramp up production are already underway, with officials projecting an increase beyond two million barrels per day in 2025. This builds on recent gains that saw crude production exceed the 1.5 million barrels per day threshold, surpassing Nigeria’s December 2024 OPEC quota. Despite these advancements, a significant portion of the country’s oil reserves remains untapped. Projects such as Shell’s Bonga South West, Chevron’s Nsiko, and ExxonMobil’s Bosi, which could collectively add hundreds of thousands of barrels per day, have yet to be fully developed. Industry analysts argue that unlocking these assets is key to sustaining long-term economic growth.
Political interference and slow approvals hurt oil sector growth.
Nigeria’s oil sector, however, continues to face structural challenges, including regulatory bottlenecks, bureaucratic inefficiencies, and corruption. Business leaders have raised concerns over the slow pace of approvals for oil licences, often attributed to demands for unofficial payments by regulatory officials. In the second quarter of 2024, Foreign Direct Investment (FDI) in the oil sector stood at a mere $5 million, reflecting investor scepticism about the business environment. Comparisons with 2014, when Nigeria attracted over $22 billion in FDI, highlight the extent of the decline. Experts warn that without clear policies and a transparent regulatory framework, private sector participation in Nigeria’s oil industry will remain constrained.
Under-investment in the sector has also been exacerbated by political interference in asset sales, leading to inefficiencies and underperformance. Industry expert Austin Avuru criticised the opaque processes that have allowed political connections to override technical capacity in the allocation of oil assets. He noted that rather than ensuring a seamless transition from international oil majors to local operators, officials have turned approvals into a tool for political leverage. The resulting uncertainty has made it difficult for new Investors to enter the market, further limiting oil production growth and economic diversification.
A stronger economy requires reducing reliance on oil.
Beyond oil production, Nigeria’s Economic Expansion also hinges on broader structural reforms. While the government has promised to remove obstacles for businesses, the country still struggles with inadequate infrastructure, inconsistent policies, and an unstable exchange rate. Addressing these issues will be critical to fostering a business-friendly environment and attracting private capital beyond the oil sector. Analysts argue that a more diversified Economy would reduce the country’s vulnerability to oil price fluctuations and create sustainable employment opportunities.
Moreover, Nigeria’s energy sector continues to struggle with challenges that go beyond crude oil, hampering industrial growth. The Power Supply crisis, worsened by underfunded Electricity distribution companies and transmission failures, forces many businesses to rely on costly alternatives like diesel generators. Addressing these issues through policy reforms and private sector investment could unlock economic opportunities. As other African nations expand their Renewable Energy and gas infrastructure, Nigeria risks falling behind unless it prioritises energy diversification and regulatory improvements.
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Ultimately, while increased oil production may offer a short-term boost, long-term growth depends on deeper reforms. Strengthening governance in the oil sector, improving regulatory transparency, and tackling Corruption are very essential for investor confidence. Investing in critical Infrastructure like roads, power grids, and refineries would also create a more stable business environment. Without these measures, achieving 7% GDP growth may remain out of reach, leaving millions vulnerable to economic hardship and limiting Nigeria’s global competitiveness.