By Sola Adebawo
There are two conversations Nigerians have about oil.
The first is nostalgic. Oil financed highways, universities, airports and decades of public spending. It positioned Nigeria as a continental heavyweight and underwrote the national budget for generations.
The second conversation is more uncomfortable. Oil distorted incentives, centralized power, weakened tax discipline and made distribution politics more attractive than productivity.
Both conversations are true.
Somewhere between them lies Nigeria’s identity crisis.
Backbone or Dependency?
Oil still accounts for the majority of export earnings and a significant share of government revenue. Even when production fluctuates, fiscal stability remains tightly tethered to hydrocarbon performance.
That reality is structural, not ideological.
Yet the global energy landscape is shifting. Investors are more cautious. ESG scrutiny is more rigorous. Energy transition policies in Europe and parts of Asia are reshaping long-term demand expectations. Multinationals are divesting from onshore positions and concentrating capital in lower-risk, higher-return environments.
Nigeria therefore faces a fundamental question.
Is oil still the backbone of the economy? In fiscal terms, yes.
But when a backbone becomes the only muscle, the body weakens.
The issue is not whether Nigeria should abandon oil. It is whether Nigeria has used oil to build productive resilience or simply to finance recurrent consumption.
Reform or Rebranding?
Recent regulatory changes have signaled intent. The restructuring of the national oil company, renewed emphasis on gas commercialization, and efforts to improve transparency and reduce crude theft all reflect movement.
These steps matter.
But reform is not the same as renaming.
Operating under a new legal framework is significant. The deeper test, however, is governance discipline, capital efficiency and insulation from political interference.
Are procurement systems tighter?
Are joint venture obligations sustainably managed?
Is regulatory certainty strong enough to attract long-cycle investment?
Energy capital is pragmatic. It responds to clarity and credible returns. If reforms reduce uncertainty, capital will follow. If they are cosmetic, markets will discount them.
Rebranding without structural change only delays reckoning.
The Gas Strategy
If oil is legacy, gas is positioning.
Nigeria holds vast gas reserves. In a world seeking transition fuels, gas offers a practical bridge. It supports power generation, industrialization and export diversification.
The “Decade of Gas” narrative is compelling, but narratives do not build pipelines.
Gas monetization requires infrastructure, financing and consistent policy signals. Domestic pipeline networks remain incomplete. Liquidity constraints in the power sector undermine offtake reliability. Export ambitions must compete with expanding global LNG supply.
Gas can be transformative. But only if underlying sector inefficiencies are resolved.
Otherwise, it risks becoming another policy slogan.
The Energy Transition Paradox
There is an obvious tension in global climate discourse. Advanced economies built prosperity on hydrocarbons and now advocate accelerated decarbonization. Developing producers like Nigeria are urged to transition even as they seek industrial scale.
The justice argument is real.
But capital flows are guided by risk-adjusted returns, not moral debates.
Nigeria must therefore think strategically. The objective is neither to defend oil indefinitely nor to abandon it prematurely. It is to maximize current hydrocarbon value while deliberately building post-oil resilience.
That requires discipline.
Windfall revenues must translate into infrastructure, education and productivity-enhancing assets. Sovereign savings mechanisms must be credible. The tax base must expand beyond petroleum dependence.
Diversification cannot remain rhetorical.
Oil and Political Economy
Oil has shaped Nigeria’s fiscal architecture. Centralized revenue collection reduced incentives for subnational tax innovation. States rely heavily on allocations. Accountability between taxpayer and government weakened. Politics often became a contest over distribution rather than production.
Energy transition discussions frequently focus on emissions. In Nigeria, the deeper challenge is structural dependency.
If oil revenues decline structurally over the next two decades, what replaces them? How will federal allocations adjust? Are states prepared to generate meaningful internal revenue?
An identity crisis emerges when a country built around one dominant resource must imagine itself differently.
The Illusion of Diversification
Nigeria often cites agriculture, fintech, creative industries and manufacturing as evidence of diversification. There has been real growth in technology and services. Nigerian entrepreneurs have demonstrated global competitiveness.
But fiscally, oil still stabilizes the macroeconomic environment.
True diversification means government revenue becomes less volatile. It means non-oil tax receipts increase materially. It means export baskets broaden sustainably.
We are not there yet.
Until that changes, oil remains not only backbone but buffer.
A Strategic Path Forward
First, optimize existing hydrocarbon assets. Reduce theft. Improve metering transparency. Strengthen regulatory predictability. Policy inconsistency is expensive in capital markets.
Second, accelerate bankable gas infrastructure while resolving power sector liquidity constraints. Energy reliability is industrial policy.
Third, treat renewables as complement, not competitor. Distributed solar and decentralized systems can expand access and reduce pressure on the grid without ideological conflict with hydrocarbons.
Fourth, confront fiscal dependency directly. Broaden taxation. Improve compliance. Incentivize states to generate sustainable internal revenue. Oil should fund transformation, not substitute for it.
Backbone or Addiction?
Addiction is not defined by usage. It is defined by inability to function without.
Nigeria can function without oil. But not yet comfortably.
Oil built the modern state. It still finances much of it. The danger lies not in producing hydrocarbons but in failing to convert that wealth into diversified strength.
The energy transition is not only about carbon. It is about identity.
Is Nigeria a hydrocarbon state navigating global decarbonization? Or a diversified economy using hydrocarbons strategically while building its next chapter?
Reform must mean more than institutional rebranding. It must mean changing incentives.
Oil can remain a backbone.
It must not remain an addiction.
