Nigeria targets cost efficiency in oil and gas amid broader economic diversification drive

Welcome to this week’s 234Digest—the deep dive edition. As Nigeria marks another milestone on its journey of reform and renewal, the country’s economic story is being rewritten in real time. From the cement bags, stacked high on the outskirts of Abuja, to the corridors of power in the capital, the push for diversification is reshaping how we do business, build infrastructure, and connect with the world.

In this deep dive, we explore how bold digital ambitions, sweeping oil sector reforms, and new trade initiatives are converging to create fresh opportunities—and fresh challenges—for investors, entrepreneurs, and everyday Nigerians. Whether you’re tracking the latest policy moves or simply curious about the forces shaping Nigeria’s future, this edition offers perspective and clarity on where the nation is headed next.

It’s approaching 12 midnight as I hit send on this newsletter. Let’s dive in.

Nigeria’s economy is undergoing a fundamental shift, balancing fiscal discipline with ambitious reforms aimed at positioning the country for long-term growth.

While non-oil sectors now account for more than 95% of GDP, hydrocarbons remain central to government revenue, foreign exchange flows, and budgetary stability. With crude oil trading below Nigeria’s $75-per-barrel benchmark for the 2025 budget, policymakers are doubling down on efforts to streamline costs and attract new investment into the energy sector.

Energy reforms signal new era

In response to fiscal pressures, President Bola Tinubu has signed a sweeping Executive Order to cut oil and gas production costs, improve operational efficiency, and strengthen revenue retention. The Upstream Petroleum Operations Cost Efficiency Incentives Order (2025) introduces performance-based tax incentives for operators who achieve verifiable cost savings, while capping tax credits at 20% of annual tax liability to balance investor incentives with fiscal stability.

"This Order is a signal to the world: we are building an oil and gas sector that is efficient, competitive, and works for all Nigerians. It is about securing our future, creating jobs, and making every barrel count," Tinubu stated, emphasizing the need for a more globally competitive market.

Rising optimism as inflation begins to ease

Marking the end of his second year in office, Tinubu acknowledged the pain caused by his reforms, particularly rising living costs, but insisted that the country was on the right track.

"Today, I proudly affirm that our economic reforms are working. We are on course to building a greater, more economically stable nation," he told Nigerians in a national address.

He admitted widespread hardship remains widespread but pointed to early signs of relief: “Despite the bump in the cost of living, we have made undeniable progress. Inflation has begun to ease, with rice prices and other staples declining.” The administration, he assured, remains committed to long-term stability.

Trade liberalisation as a catalyst for growth

In parallel with energy reforms, Nigeria is moving to diversify its economy through trade liberalisation.

The World Bank’s latest Nigeria Development Update highlights lifting trade restrictions as part of critical reforms that could make 2025 a breakout year for Nigeria’s economic performance. "With fiscal space created through recent macro fiscal reforms, Nigeria now has a historic opportunity to improve spending and invest in human capital, social protection and infrastructure," the report notes, urging policies that drive inclusive growth.

The World Bank estimates that lifting trade restrictions could reduce poverty by 2.6 percentage points, providing direct relief for millions facing high living costs. Aligning Nigeria’s tariffs with the ECOWAS Common Tariff (CET) could also increase customs revenue by as much as 66%, strengthening government fiscal capacity and boosting regional commerce.

Unlocking regional opportunity

To drive this transition, Nigeria has launched the Afreximbank African Trade Centre (AATC) in Abuja, the first of seven planned AATCs across Africa. These centers—including upcoming locations in Kampala, Uganda, Harare, Zimbabwe, Cairo, Egypt, and Kigali, Rwanda—are designed to serve as integrated platforms linking buyers, sellers, suppliers, service providers, enterprises, governments and financial institutions.

With Nigeria leading this initiative, the AATC is expected to solidify its status as a key trade hub within Africa, supporting intra-African investment and expanding business opportunities.

Technology at the heart diversification

Meanwhile, technology is becoming a corner stone of Nigeria’s economic transformation.. The government’s Project Bridge, a $2 billion initiative, will deploy 90,000 kilometers of fiber optic cable and 7,000 telecom towers by late 2025. The project, when completed, is expected to boost broadband penetration from 48% to 90%.

Nigeria’s ICT sector is already reshaping the investment landscape, driving innovation and attracting foreign capital. Lagos—now Africa’s fastest-growing tech hub—saw venture capital flows surge 42% year-over-year to $252 million last year, reflecting rising investor interest in fintech, e-commerce, and digital banking expansion.

"Increasing connectivity by just 10% could add 2.5% to GDP," said Minister Bosun Tijani, highlighting Nigeria’s position as a frontier market for digital transformation.

Challenges on the horizon

Despite policy momentum challenges remain. Power shortages, transportation inefficiencies, and regulatory uncertainty continue to pose risks. The government’s ability to sustain fiscal discipline, manage oil price fluctuations, and execute policy commitments will be critical for maintaining investor confidence and unlocking Nigeria’s full potential.

Looking ahead

The World Bank projects Nigeria’s GDP growth at 3.7% in 2025, its best performance since 2014 (excluding post-pandemic rebounds). While inflation remains a concern, early signs of moderation suggest gradual improvements in cost stability.

As technology, energy, and trade reforms reshape Nigeria’s investment landscape, the comin year will be a test of whether policy momentum can translate to broad-based, inclusive growth. For investors and citizens alike, the question is whether Nigeria can sustain this momentum and truly emerge as Africa’s next big investment story.

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