Nigeria's Oil Industry Slows as Profitable Firms Hold Back InvestmentNigeria's Oil Industry Slows as Profitable Firms Hold Back Investment

The sector's real growth slowed to 2.6% in the first half of 2026, from 10.7% in the same period last year, according to a report by the Nigerian Economic Summit Group (NESG), reported by Punch on Monday

Average crude oil production was 1.63 million barrels per day during the period, slightly below the 1.68 million barrels per day recorded in the first half of 2025. It was, however, above the 1.53 million barrels per day recorded in 2024.

The report points to a gap between companies' financial position and their willingness to invest in new capacity.

Profits are improving, but investment is not

The NESG report says the sector's Operating Profit Index stood at 119.3 in the first half of 2026, while its Cash Flow Index reached 130.5. Access to Credit was also above the 100-point benchmark, at 120.9.

These are survey indices, not percentages. A reading above 100 indicates expansion compared with the benchmark used by the report.

Investment moved in the opposite direction. The Investment Index fell from 95.7 in the first half of 2025 to 92.7 in the first half of 2026, remaining below the 100-point line that separates expansion from contraction.

That matters in an industry where new wells, pipelines, processing plants and maintenance require substantial long-term spending. Without investment, current production and profits may not translate into stronger output or more local processing in future years.

The report identified inadequate electricity supply and economic uncertainty among the main constraints facing businesses. The weakness is particularly striking in an industry that supplies much of the fuel used to power the wider economy.

Nigeria's oil exports are changing

The country's export mix is also shifting as domestic refining expands. The NESG report, as cited by Punch, says crude oil's share of Nigeria's total exports fell from 71.4% in 2024 to 55.7% in 2025 and 52.9% in the first half of 2026.

Non-crude petroleum products took a larger share as the Dangote Petroleum Refinery moved into full operations. The shift suggests that more of Nigeria's petroleum trade is moving beyond exports of unprocessed crude, although the figures alone do not establish how much additional value is being retained locally.

The refinery's role is significant because it changes the relationship between crude production, domestic fuel supply and exports. But a larger share of refined products does not remove the need to invest in upstream production, gas infrastructure, pipelines, power and industrial services.

Mwenendo has followed the Dangote refinery's share offer and its implications for Nigerian investors, as well as the changing value of Dangote Cement shares.

Turning profits into new capacity

The report presents a mixed picture. Companies are reporting stronger operating profits, cash flow and access to credit, while investment remains below the expansion benchmark and overall sector growth has slowed.

The challenge for Nigeria is to turn favourable company finances into projects that increase productive capacity. That requires reliable electricity, predictable rules, security for infrastructure and confidence that long-term investments can earn a return.

The figures also make it harder to judge the sector by crude production alone. Refining and other petroleum products are changing the export mix, but the country still needs new investment across the wider energy value chain.

The NESG report does not say that every oil company has stopped investing. Its index points to weak investment conditions across the sector. The distinction matters: the issue is a broad shortfall in investment momentum, not proof that no projects are moving forward.

For Nigeria, the next test is whether stronger profits lead to more wells, gas processing, reliable infrastructure and jobs, or whether the gap between company finances and new investment persists.