- Oil, gas and coal will continue to drive Nigeria’s energy-led economic growth in 2026.
- Electricity supply constraints will continue to be the sector’s biggest structural challenge.
Nigeria’s economy is projected to sustain momentum in 2026, primarily driven by growth in the country’s energy sector. Current estimates place economic expansion between four and 4.4 per cent in the new year. Notably, the energy sector emerged as one of the fastest-growing segments in 2025. This performance followed the introduction of sweeping oil and gas reforms by President Bola Tinubu. Consequently, investor confidence improved while indigenous participation expanded across upstream operations.
In 2025, Nigeria’s energy sector delivered mixed results across oil and gas, coal mining and electricity supply. However, oil and gas recorded the strongest performance. According to data from the Nigerian Upstream Petroleum Regulatory Commission, upstream activity strengthened considerably. For instance, the number of active rigs rose to 18 in November 2025, up from 11 a year earlier. As a result, exploration activity expanded sharply.
Therefore, crude oil production climbed to an average of 1.8 million barrels per day in 2025. This marked a clear recovery from previous years. Similarly, gas output surged, reaching nearly seven billion standard cubic feet per day by October. Additionally, non-associated gas production also experienced significant growth.
Meanwhile, coal mining rebounded strongly after an early-year contraction. The subsector moved from a sharp decline to strong quarterly growth by the third quarter. Hence, analysts expect this momentum to continue into 2026.
Despite these gains, electricity supply remains the sector’s weakest link, with power generation continuing to hover between 4,000 and 5,500 megawatts nationwide. However, Nigeria requires roughly 30,000 megawatts to meet demand. Consequently, households and businesses continue to rely on alternative power sources.
Nevertheless, Nigeria’s broader energy sector growth remains supported by key reforms. Tax incentives for deep offshore projects have unlocked over $10 billion in final investment decisions. Major projects by Shell and TotalEnergies have already strengthened production prospects. Additionally, regulatory orders have accelerated asset transfers from exiting international oil companies to local companies.
As a result, indigenous producers now account for more than 60 per cent of national output. Several firms have revived dormant wells, resulting in a significant increase in daily production. Therefore, Nigeria stands better positioned to meet its 2026 production targets, barring external shocks.
Furthermore, downstream deregulation continues to reshape the supply of refined products. The Dangote Refinery has reduced fuel imports, saving billions in foreign exchange. Its expansion is expected to accelerate economic growth further in 2026.
However, unresolved structural issues still weigh heavily on the power subsector. Transmission bottlenecks, tariff freezes and mounting debts persist. As a result, analysts expect another uneven performance across energy sub-sectors in 2026.