Nigeria’s Deepwater Oil Production: A Sector in Crisis

Nigeria’s deepwater oil production—once the crown jewel of its offshore energy sector—has slumped to a five-year low. The reason? Aging rigs, outdated infrastructure, and a persistent investment drought. According to BusinessDay, this output collapse is eroding Nigeria’s ability to meet global oil demand and choking the flow of petro-dollars critical to its fragile economy.

The future of Africa’s largest oil producer hangs in the balance. With output plummeting to 428,385 barrels per day (bpd), a staggering 32% decline from 2020, this crisis reflects deeper structural and investment challenges that call for urgent reforms and revitalization in the oil sector.

The Impact of Declining Oil Production

The significant downturn in Nigeria’s deepwater oil output carries far-reaching economic implications. Oil revenues are crucial for government budgets, impacting everything from public services to infrastructure development. With deepwater oil traditionally serving as a buffer against instability in onshore regions, this decline threatens to unravel economic gains and hinder foreign investment inflows at a time when Nigeria can least afford it.

Industry observers forecast that if current trends persist, Nigeria risks losing its prominent position among top oil producers in Africa. As competitors like Brazil and Guyana ramp up output and seize a greater share of the global market, the Nigerian economy could miss out on billions of potential revenue, jeopardizing its financial future.

Navigating Bureaucratic Hurdles

The stagnation in production is not only due to aging infrastructure; it is profoundly intertwined with legal and regulatory challenges. Oil operators frequently cite bureaucratic hurdles as a major impediment to investments and operational efficiency. Inadequate management of Production Sharing Contracts (PSCs) and sluggish approval processes frustrate industry stakeholders, leading to delayed Final Investment Decisions (FIDs) for crucial projects.

Ola Alokolaro, managing partner at Advocaat Law Practice, emphasizes the need for substantive reforms. “Amendments to our laws must be expedited,” he asserts, advocating for streamlined regulations that could bolster investment and production. Only through addressing these legal roadblocks can Nigeria hope to revive its moribund deepwater oil sector.

Political Power Shifts: The Quest for Governance Reforms

Political dynamics play a pivotal role in the current oil crisis. Critics argue that governance issues, rather than geological ones, are stifling the development of Nigerian oil fields. Deep-seated corruption, lack of transparency, and bureaucratic inefficiencies are pervasive throughout the oil sector, undermining investor confidence.

The Nigerian government has recently signed executive orders aimed at reforming the sector by offering tax incentives and reducing costs. However, NJ Ayuk, executive chairman of the Africa Energy Chamber, warns that without timely and consistent execution, these reforms will remain merely theoretical, failing to alter the existing power dynamics that constrain production capabilities.

Field-Specific Analysis: Winners and Losers in a Declining Sector

A deeper examination of field-level production data from 2020 to April 2025 illustrates a sector in distress. Notable declines are evident across major operators, with Shell’s Bonga field swinging from highs of 117,506 bpd in 2020 to a precarious low of just 3,029 bpd in 2022. Although it stabilized at around 127,600 bpd in 2025, it still falls short of previous benchmarks.

Similarly, TotalEnergies’ Egina field has witnessed a dramatic plunge from 154,027 bpd to just 63,916 bpd in the same timeframe. While some fields like Abo (Eni) demonstrate resilience, most are grappling with production inconsistencies that underscore the need for urgent reform and enhanced operational strategies.

What Lies Ahead?

The ongoing decline in deepwater oil production is more than just a series of unfortunate statistics; it poses existential threats to Nigeria’s economic stability. With foreign exchange earnings critically at stake, failure to rejuvenate the sector could lead to widespread economic repercussions, including job losses and deteriorating public services.

As Nigeria navigates this precarious moment, financial experts warn that the stakes are exceptionally high. “The geology is not the problem; it’s governance,” notes a senior oil executive. “If Nigeria gets the rules right, the rigs will return.” The ultimate outcome will depend on the government’s ability to implement seismic changes swiftly and effectively.

In an era where investment is drawn to locales with clearer regulatory frameworks and efficient operational ecosystems, Nigeria stands at a crucial crossroad. The time for decisive action is now—either accelerate industry reforms, address infrastructural shortcomings, and stimulate investment, or continue on a trajectory toward irrelevance in the global oil landscape.

Insights

By keeping a strategic focus on governance, investment reform, and operational excellence, Nigeria can potentially reclaim its stature in the energy sector and leverage its vast resources for future growth. Financial managers and policymakers alike must recognize that the health of Nigeria’s economy is intricately linked to the revitalization of its deepwater oil production.

Global Implications, Local Consequences

This isn’t just a Nigerian problem. The decline in deepwater output may contribute to:

• Tightening global supply,

• Higher oil prices,

• Increased reliance on OPEC+ adjustments.

Locally, it means less FX income, fewer jobs, and a dent in GDP growth projections.

Can Nigeria Reverse the Tide?

To reclaim its position in offshore production, Nigeria must:

1. Incentivize rig upgrades through tax breaks and easier contract approvals.

2. Ensure transparent implementation of the PIA.

3. Attract JV funding through credible energy diplomacy and security guarantees in the Niger Delta.

Wake-Up Call for Energy Policy

The decline in Nigeria’s deepwater output is more than just a technical problem—it’s a signal that policy inertia and poor asset management are costing the country billions. As the world pivots toward cleaner energy, Nigeria must extract maximum value from its existing assets before the window closes.