The Functions of Nigeria's Ministry of Petroleum Resources

Nov 10, 2025 0

The Federal Ministry of Petroleum Resources in Nigeria holds primary responsibility for policy direction and exercises supervisory oversight over the country's oil and gas industry. The oil & gas sector is very critical to the Nigerian economy; the earnings from oil & gas export is up to 90% of the total export earnings of the government. There are various laws regulating oil and gas in Nigeria.

As of the end of 2024, the oil and gas outlook for Nigeria reflects a complex landscape shaped by various factors.

Key Responsibilities and Agencies

Several agencies and corporations operate under the Ministry's supervision, each with specific functions:

Nigerian National Petroleum Corporation (NNPC): Established in 1977, NNPC has the sole authority over petroleum activities in Nigeria. NNPC is involved in exploration, production, transportation, processing of oil, refining, and marketing of crude oil through its subsidiaries.
Nigerian Content Development & Monitoring Board (NCDMB): The primary duty of the NCDMB is to promote local investment and participation in the oil & gas sector.
National Oil Spill Detection & Response Agency (NOSDRA): NOSDRA is the government agency responsible for monitoring and control of oil spills in Nigeria. The functions of the Agency include the surveillance and ensure compliance with all existing environmental legislation and the detection of oil spills in the petroleum sector.

The legal framework regulating the oil sector in Nigeria is based on several laws. The principals among these laws are the 1999 Constitution of Nigeria (as amended) and the Petroleum Act, which vested ownership and control of oil found anywhere in Nigeria in the Federal Government. Nigeria has several legislations, regulations and directives regulating various aspects of the oil industry.

Fiscal agreements are set of agreement that governs the relationship between the government and parties involved in Exploration and Production of oil and gas in Nigeria. This agreement also determines risk, obligations, chargeable tax, and how the economic benefits derived are to be structured. In Nigeria, an investor may choose to operate under any of this agreement.

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Historical Context

The evolution of the Ministry reflects the growth and increasing importance of the petroleum industry in Nigeria:

Initially, a Petroleum Division was established within the Ministry of Mines and Power.
In 1971, the Nigerian National Oil Corporation (NNOC) was created to handle direct commercial operational activities in the oil industry on behalf of the Federal Government.
In 1975, the department was upgraded to a ministry named, the Ministry of Petroleum and Energy, which was later renamed the Ministry of Petroleum Resources.

Organizational Structure

The Ministry is structured hierarchically:

The Minister is a political appointee.
The Permanent Secretary, a veteran civil servant, is the Chief Accounting Officer of the Ministry.
Directors report directly to the Permanent Secretary, while deputy directors and assistant directors head divisions and sub-sections/units, respectively.

Recent Legislative Changes: The Petroleum Industry Act (PIA) Amendment

Nigeria’s Attorney General has notified several of the country’s Federal agencies, of President Ahmed Tinubu’s approval of the proposed amendment to the Petroleum Industry Act (PIA). The proposed legislation is titled ‘The Petroleum Industry Act (Amendment) Act 2025’. The planned amendment was originated by the Minister of Finance, with the stated goal of addressing the “escalating fiscal leakage and revenue loss confronting the Federation.” The AG called for a meeting to “deliberate on the early implementation of the President’s directives”.

The Petroleum Industry Bill (PIB) pending before the National Assembly aims to harmonize all the legislations and significantly restructures the industry, particularly the functions of the various regulatory agencies, intending to eliminate overlaps. In an attempt to secure the passage of the bill, the government has divided the bill and intends to pass it in phases. The first one is the Petroleum Industry Governance Bill. The upstream sector, the most active sector of the Nigerian petroleum industry, is largely export-focused and until recently dominated exclusively by international oil companies.

Key Changes in the Amendment

The most consequential part of the proposed amendment is the overhaul of Section 8, which currently outlines the commercial regulatory functions of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). In addition to its existing roles of reviewing and approving the commercial aspects of field development plans in upstream petroleum operations and developing cost studies and benchmarks for evaluating upstream petroleum operations, the amendment proposes that:

The NUPRC will act as the government representative in all model contracts attached to licenses and leases contemplated in Section 85.
The NUPRC will replace the Nigerian National Petroleum Company Limited (NNPCL) as the concessionaire in all subsisting Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts.
In this role, the NUPRC will be responsible for evaluating and approving all relevant work programs and verifying and approving all contractor costs to determine cost-recoverable expenditure under these contracts.

Ownership Structure Changes

The amendment also seeks to oust the Ministry of Petroleum Incorporated (MOPI) as a co-equal shareholder of NNPCL with the Ministry of Finance Incorporated (MOFI). To achieve this, Section 53 of the PIA will be amended to read: “Ownership of all shares in NNPC Limited shall be vested in the Federation at Incorporation and held by the Ministry of Finance Incorporated as the sole bare agent of the Federation.”

Changes to Integrated Operations

The amendment calls for a reversal of a settlement from the early days of the Tinubu administration, regarding the delineation of duties between the NUPRC and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) on integrated joint operations. The current law states that “where in situ facilities or fixed or floating platforms or vessels provide for fully integrated upstream and midstream petroleum operations, the Commission shall consider and the Commission shall be in charge of such integrated operations and petroleum operations may be considered integrated where there is a joint use of utilities used exclusively for the upstream and midstream operations.” The amendment proposes a deletion of this provision and instead proposes the constituting of a joint project team of NUPRC and NMDPRA to be responsible for the technical regulation of integrated operations.

Concerns Over Governance and Strategic Direction

The amendment introduces significant changes to the governance structure of the NNPCL, raising serious concerns about its operational autonomy and strategic direction. By transferring the responsibility of setting the strategic direction and objectives of the NNPCL board and corporation to the Ministry of Finance Incorporated (MOFI) as a single agent, the amendment risks undermining the principles of modern corporate governance. This shift positions MOFI as a “bare agent” of the Federation, effectively weakening the NNPCL Board’s autonomy in steering the corporation. Such a move could open the door to excessive political influence over corporate priorities, eroding the separation of ownership from management that is critical for effective governance.

Moreover, this restructuring reduces NNPCL’s commercial independence, as the Board would primarily serve as an executor of MOFI’s directives. This could severely limit NNPCL’s ability to make agile, commercially responsive decisions, particularly in the fast-paced global energy markets. As a finance-focused entity, MOFI may prioritize fiscal or political considerations over operational efficiency, competitiveness, and long-term sustainability, potentially distorting investment priorities and stifling innovation or partnerships.

The amendment also poses risks to investor confidence, as it appears to reverse the PIA’s original intent to professionalize and commercialize NNPCL. Potential investors may perceive this shift as a re-politicization of the corporation, undermining trust in its governance and reducing interest in partnerships or capital inflows.

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Nigeria continues to face significant economic challenges due to oil theft and disruptions in production, which impact a vital source of government revenue and GDP. In 2024, the country’s average daily oil production was approximately 1.43 million barrels per day (bpd) as of October, marking a slight increase from earlier months but still below the OPEC quota of 1.5 million bpd. Oil theft remains a persistent issue, causing billions of dollars in revenue loss annually.

Nigeria remains a leading African oil producer, exporting high-value, low-sulphur crude oil, and remains a significant exporter of liquefied natural gas (LNG). The $10 billion Nigeria Liquified Natural (NLNG) Train 7 project continues to progress, aiming to enhance LNG production capacity in the coming years. NLNG currently operates six LNG production units (referred to as “trains”) at its Bonny Island facility in Rivers State. The Train 7 project is designed to add a seventh unit, boosting annual LNG production from the current 22 million metric tons (MMT) to approximately 30 MMT. The Petroleum Industry Act (PIA), implemented in 2021, is gradually reshaping the oil and gas sector by streamlining regulations and fiscal structures, facilitating stalled projects, and potentially boosting production efficiency.

Why PIA Is Important To Nigeria's Oil And Gas Industry - Expert | Business Morning

Mining Sector Overview

The Ministry of Solid Minerals Development (MMSD) has taken an active role in attracting both local and international investment, with current mining activities concentrated in Gold, Baryte, Tin, Lead, and Zinc mining and processing. A notable development is the discovery of Lithium deposits in Northern Nigeria, creating new opportunities for local mining companies.

The government has implemented substantial institutional and legal reforms to enhance the sector’s attractiveness for investment. These reforms focus on addressing the underutilized potential of solid mineral wealth and creating a more favorable environment for foreign investment. The regulatory framework continues to evolve with ongoing discussions about mining activity regulations and environmental compliance.

Despite some advancements, Nigeria’s mining sector continues to face considerable challenges in 2024. Production has been affected by a lack of reliable geoscience data, inadequate infrastructure, and security issues, particularly in mineral-rich regions. Access to electricity, transportation to mine sites, and outdated equipment are among the most critical barriers to efficient operations.

To enhance governance and focus, Nigeria split its mining administration into the Ministry of Solid Minerals Development and the Ministry of Steel Development in 2023. These entities are tasked with improving sector-specific operations and advancing projects like rail rehabilitation and tax incentives to attract private investments. However, the industry still grapples with environmental concerns, community engagement issues, and a need for technological modernization.

Key Factors Influencing the Oil and Gas Sector

Production Levels: Nigeria has been aiming to increase oil production levels, with targets set to enhance output from approximately 1.5 million barrels per day (bpd) to higher levels. However, challenges such as pipeline vandalism, regulatory issues, and maintenance of aging infrastructure continue to hinder full production potential.
Investment Climate: The Nigerian government is actively seeking foreign investment to boost the oil and gas sector, especially in exploration and production. Reforms aimed at improving the regulatory environment are expected to attract new investors.
Global Oil Prices: Fluctuating global oil prices will significantly impact Nigeria’s economy, which is heavily reliant on oil revenues. Prices have seen volatility due to geopolitical tensions, OPEC+ production decisions, and global demand shifts.
Transition to Renewables: There is an increasing emphasis on diversifying the energy mix, with Nigeria exploring renewable energy options. The government is promoting gas as a transitional fuel while also investing in solar and wind energy projects.
Local Content Development: Efforts to boost local content in the oil and gas industry continue to be a priority. The government is pushing for increased participation of Nigerian firms in oil exploration and production activities.
Environmental Concerns: Environmental issues, particularly in the Niger Delta, remain a significant challenge. Communities are advocating for more sustainable practices and equitable sharing of oil revenues, leading to potential social unrest if not adequately addressed. Crimes of opportunity persist in host communities through which oil and gas pipelines run.
Technological Advancements: The adoption of new technologies in exploration and production, such as digital tools and enhanced oil recovery techniques, is expected to improve efficiency and output.