The third quarter of 2026 reflected Nigeria’s energy sector moving from broad legislative reform towards regulatory implementation, enforcement, and market restructuring. Across the petroleum sector, regulators focused on upstream licensing and performance obligations, deep offshore fiscal incentives, domestic gas supply, and competition and market access, while the electricity sector saw continuing decentralisation of regulatory functions and increased intervention in the financial management of Distribution Companies. This edition of the Energy Law Digest covers the key developments.

HIGHLIGHTS IN THIS EDITION:

Upstream Licensing and Performance Obligations: From Acreage Allocation to “Drill-or-Drop” Enforcement
On 21 July 2026, the NUPRC announced 31 successful companies for 37 oil and gas blocks under the 2025 Licensing Round. More significantly, in a circular dated 14 September 2026, the Commission moved towards active enforcement of the “drill-or-drop” principle, directing holders of non-performing licences from the 2020 Marginal Field Bid Round, 2022/2023 Mini Bid Round, and 2024 Licensing Round to disclose compliance status and submit mitigation measures and revised timelines by 31 October 2026, with non-performance risking refusal of extensions, relinquishment, or revocation.

Deep Offshore Investment and Fiscal Incentives
On 6 August 2026, President Bola Ahmed Tinubu signed the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order 2026, introducing Standard and Supplementary Production Tax Credits for qualifying deep offshore developments, along with a Profit Oil Reset allowing the profit-oil sliding scale to restart at a 70:30 Contractor-Government split for approved Production Sharing Contract projects — subject to Final Investment Decision, Nigerian-content, and compliance conditions, with clawback provisions for improperly obtained incentives.

Domestic Gas Supply Obligations and Gas Market Reform
In July 2026, the NUPRC held a stakeholder workshop on a proposed Gas Swap Framework following DGDO compliance of approximately 65% in June 2026. In August, the Commission also disclosed consultations on a broader domestic crude oil and gas swap arrangement, while strengthening oversight of the Gas Flare Commercialisation Programme, under which 27 of 43 identified flare-gas sites had been awarded. Separately, the NMDPRA set 24 September 2028 as the target date for Nigeria’s domestic gas market to transition to a fully established willing-buyer, willing-seller framework.

Competition and Market Access in the Midstream and Downstream Petroleum Sector
On 6 August 2026, the NMDPRA published draft Midstream and Downstream Petroleum Prevention of Anti-Competitive Practices and Behaviour Regulations 2026 for stakeholder engagement, comprising 138 regulations across 23 Parts addressing anti-competitive conduct, abuse of dominance, and access to essential infrastructure. The NMDPRA and FCCPC also entered a Memorandum of Understanding in September 2026 to strengthen coordination on competition regulation, and on 28 September 2026 the Federal High Court in Abuja ordered the NMDPRA to continue granting and renewing petroleum products import licences to Matrix Energy, A.A. Rano, and AYM Shafa.

Decentralisation of Electricity Regulation
On 19 August 2026, NERC issued a Transfer Order handing regulatory oversight of the electricity market in Akwa Ibom State to the newly established Akwa Ibom State Electricity Regulatory Commission, continuing the state-level regulatory framework contemplated under the Electricity Act 2023. On 27 August 2026, the Forum of Nigerian Electricity Regulators held its second coordination meeting with NERC and State Electricity Regulatory Commissions.

NERC Intervention and Financial Governance of Distribution Companies
On 10 August 2026, NERC dissolved the Board of Kaduna Electricity Distribution Plc (KAEDC) over significant financial and operational underperformance — including 41.93% remittance of adjusted market invoices and ATC&C losses of 71.88% — appointing an Interim Board and Administrator, with Afrexim Bank to coordinate a 12-month process to secure a replacement core investor. In September 2026, NERC also issued a revised Order requiring DisCos to set aside an increasing share of operating expenditure (rising from 50% to 60% by February 2027) for approved network-improvement projects.

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