PIA Uncertainty Threatens Nigeria’s Oil and Gas Investment, PENGASSAN Warns

PIA Changes Raise Investor Concerns Over Nigeria’s Oil and Gas Sector

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has warned that uncertainty surrounding changes to the Petroleum Industry Act (PIA) could discourage investors from committing fresh capital to Nigeria’s oil and gas industry.

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Festus Osifo, the immediate past president of PENGASSAN, said investors require greater certainty over the laws, taxes, royalties and other fiscal obligations governing oil and gas projects before committing capital to developments that can take several years to generate returns.

He raised particular concerns about changes made to provisions of the PIA after its enactment in 2021, including the movement of some fiscal provisions to Nigeria’s new revenue legislation and the use of executive orders to alter arrangements linked to the Act.

PIA Was Designed to Provide Regulatory Certainty

The PIA came into effect in 2021 following years of efforts to reform Nigeria’s petroleum industry.

The legislation introduced a new institutional framework for the sector, including the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). It also provided the framework for the transition of the former Nigerian National Petroleum Corporation into NNPC Limited.

Osifo said the legislation initially generated optimism within the industry because investors expected it to provide a clearer and more stable operating environment.

However, he argued that subsequent changes to parts of the framework have raised questions about how predictable the regulatory environment will remain.

Investors Need Clarity on Long-Term Project Costs

Oil and gas projects require substantial upfront capital and often have long development and payback periods.

Osifo said an investor committing $10 million to a project needs to understand the taxes, royalties and other obligations that will apply to the investment over its expected lifespan.

Uncertainty over whether those obligations could change several years after an investment has been made can affect the economics of a project and influence whether an investor proceeds.

He said this concern becomes particularly significant where projects may take several years before generating returns.

The issue is therefore not simply the immediate financial impact of a regulatory change. It is the wider question of whether investors can reliably forecast the future operating environment.

Movement of Fiscal Provisions Raises Concerns

One of the issues highlighted by Osifo is the movement of fiscal provisions previously contained within the PIA into Nigeria's revenue legislation.

He said the PIA contains provisions relating to fiscal matters, including royalties, but some of those provisions were moved during the passage of the Nigeria Revenue Service legislation.

According to him, such changes can create uncertainty for investors who based investment decisions on the original legal framework.

For capital-intensive projects, changes to the fiscal framework can influence expected returns, project timelines and investment decisions.

Executive Orders Also Under Scrutiny

PENGASSAN has also questioned the use of executive orders to alter arrangements associated with the PIA.

Osifo raised concerns over an executive order affecting the Frontier Exploration Fund and other provisions connected to the petroleum legislation.

His argument is that where the National Assembly has enacted legislation, significant changes to its provisions should follow the appropriate legislative process rather than rely on executive action.

The concern extends beyond one particular provision. PENGASSAN believes investors could become more cautious if they conclude that other parts of the regulatory framework could also be changed without sufficient certainty.

Regulatory Stability Matters for Oil Exploration

Nigeria needs substantial investment to increase oil and gas production, develop new fields and maintain existing infrastructure.

The country's ability to attract that investment depends partly on the commercial attractiveness of its petroleum resources. Regulatory stability is another important factor.

Investors compare jurisdictions based on factors such as geological prospects, fiscal terms, infrastructure, security, operating costs and regulatory certainty.

Where two countries offer similar investment opportunities, uncertainty around future regulations can influence where capital ultimately goes.

Investment Delays Could Affect Production Growth

A reduction in investment can have consequences beyond individual companies.

Oil exploration and field development require continuous capital expenditure to maintain production and bring new reserves into production.

If companies delay final investment decisions because of uncertainty, projects can take longer to commence, potentially affecting future production levels.

Nigeria has been seeking to increase crude oil output and attract fresh capital into upstream operations. Regulatory predictability will therefore remain an important part of efforts to achieve those objectives.

Policy Changes Need to Balance Government and Investors

The concerns raised by PENGASSAN do not mean that petroleum regulations should remain permanently unchanged.

Governments need the ability to respond to changing economic conditions, improve revenue collection, protect communities and address weaknesses in existing legislation.

The challenge lies in ensuring that changes remain transparent, legally grounded and sufficiently predictable for investors.

A stable regulatory environment does not necessarily mean a static one. It means investors can understand how changes are introduced and assess their implications before committing capital.

PIA Has Produced Institutional Changes

Despite its concerns, PENGASSAN acknowledged that the PIA has introduced important changes to Nigeria's petroleum industry.

The legislation established new regulatory institutions and supported the restructuring of NNPC into a commercially oriented company.

It also introduced frameworks for host community development and frontier exploration, according to Osifo.

These reforms were intended to improve sector governance, strengthen regulation and create structures capable of supporting greater investment.

The challenge, according to PENGASSAN, is ensuring that these gains are not undermined by continuing uncertainty around the underlying rules.

Host Communities Also Need Predictability

Regulatory certainty has implications beyond investors and government revenues.

Host communities depend on the petroleum industry for employment, development funding and economic activity.

PENGASSAN has previously argued that host communities, government and investors all require confidence in the rules governing the sector.

A predictable framework can help companies plan their community-development obligations while allowing host communities to understand what they can expect from petroleum operations.

Oil and Gas Investment Supports Wider Infrastructure

The consequences of investment decisions in the petroleum sector also extend into Nigeria's wider economy.

Oil and gas projects generate demand for engineering services, logistics, construction, fabrication, transportation and other supporting industries.

Greater investment can therefore create opportunities across industrial and infrastructure supply chains.

For the built environment, stronger petroleum-sector investment can also support demand for commercial facilities, worker accommodation, logistics infrastructure and industrial developments in areas where new projects emerge.

Regulatory Overlap Remains a Concern

PENGASSAN has also raised concerns about overlapping responsibilities among government institutions in the oil and gas sector.

In an earlier statement, Osifo called for a more predictable, transparent and efficient regulatory framework, warning that repetitive approvals, multiple inspections and conflicting directives could discourage investment.

The association has argued that effective regulation should protect workers, communities, government revenues and investors without creating unnecessary administrative delays.

Streamlining regulatory processes could therefore improve the speed at which companies move from exploration and appraisal to development and production.

Nigeria Needs Long-Term Investment Confidence

Nigeria's petroleum sector requires long-term capital rather than short-term financial flows alone.

Exploration, field development, processing infrastructure and other petroleum projects often require investors to commit significant resources before receiving returns.

That makes confidence in the policy environment particularly important.

If investors cannot reasonably forecast taxes, royalties and other obligations over the life of a project, they may demand higher returns to compensate for regulatory risk or redirect capital to jurisdictions they consider more predictable.

Outlook

PENGASSAN's warning highlights a key challenge for Nigeria's oil and gas reform programme: maintaining the flexibility to improve regulation while providing investors with sufficient certainty to commit long-term capital.

The association is calling for greater consistency in the implementation of the PIA and caution against frequent changes to its framework.

For Nigeria, the stakes extend beyond individual investment decisions. Sustained capital inflows are important for exploration, production growth, infrastructure development, employment and government revenue.

As the Federal Government seeks to increase oil and gas output and attract fresh investment, regulatory stability will remain an important test of the country's ability to turn petroleum reforms into long-term economic gains.

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