The global oil and gas industry is standing at a crossroads. It powers economies, fuels industries, and sustains millions of jobs, yet it is also the single largest contributor to greenhouse gas emissions. For Nigeria, where crude oil remains a lifeline, accounting for a large share of government revenue and foreign exchange, this creates a delicate balancing act: how do we safeguard current value while preparing for a lower-carbon future?
This tension defines what ESG practitioners call transition risk, the financial and operational exposure companies and economies face as climate policies, technologies, and market preferences shift. If this transition accelerates faster than expected, oil-dependent nations like Nigeria could see revenues shrink, assets stranded, and livelihoods threatened.
Why transition risk demands urgent action
The future of oil demand is far from certain. Some analysts forecast a rapid decline as the energy transition gathers momentum, while others expect fossil fuels to remain part of the mix for decades. For Nigerian policymakers and boardrooms, this uncertainty demands planning for multiple scenarios. A strategy based only on today’s demand trajectory risks leaving the country dangerously exposed if markets pivot sharply.
Meanwhile, regulatory signals are getting stronger. Nigeria has announced plans for mandatory climate-related disclosures within a defined timeline, and oil licence applicants must now outline emissions-reduction strategies and integrate renewable components into their projects. These measures signal a new reality: energy companies that cannot demonstrate credible transition plans risk losing access to contracts, capital, and investor confidence.
How companies can respond
For Nigeria’s oil and gas operators, managing transition risk requires tangible, measurable action. Three priorities stand out:
1. Strengthen the core business:
Cutting operational emissions is no longer optional. Ending routine flaring, reducing methane leaks, and driving efficiency are essential to keep production assets competitive under future pricing scenarios.
2. Invest selectively in low-carbon solutions:
Opportunities exist in natural gas as a bridge fuel, renewable energy projects integrated with existing infrastructure, and emerging technologies such as carbon capture, utilisation, and storage (CCUS). While CCUS faces scaling and financing hurdles, the International Energy Agency (IEA) considers it critical for decarbonising hard-to-abate sectors.
3. Enhance transparency:
ESG credibility depends on independently verified emissions reporting and clear performance tracking. Companies that fail to provide reliable data risk accusations of greenwashing and exclusion from global capital flows.
The role of policymakers
The burden of managing transition risk cannot rest solely on the private sector. Government action is critical to set clear direction and maintain investor confidence. Policymakers should:
- Establish transparent disclosure frameworks and licensing conditions.
- Introduce fiscal regimes that reward emissions reduction while protecting revenue stability.
- Create just transition plans for oil-producing communities and workers who risk being left behind.
Nigeria’s ongoing reforms show intent, but consistent implementation and policy predictability will determine whether these reforms inspire trust or scepticism among investors.
Bridging the finance gap
No energy transition is possible without capital. Nigeria, like many emerging markets, faces a severe climate finance deficit. Unlocking concessional loans, development finance, guarantees, and private-sector investments is vital. The key is to present bankable projects, initiatives that tie decarbonisation to job creation, economic resilience, and measurable community benefits. Without targeted financing, the country risks not just stranded oil assets but stranded communities.
The bottom line
Balancing transition risk in Nigeria’s oil and gas sector is not about ticking ESG boxes; it is about safeguarding economic stability. Done well, Nigeria can leverage its energy legacy to become a leader in sustainable energy development, turning current challenges into opportunities for growth. Done poorly, the nation risks deeper inequality, investor flight, and economic shocks.
The roadmap is clear:
- Mandate credible ESG disclosures across the energy sector.
- Incentivise emissions reduction through smarter fiscal policies.
- Mobilise blended climate finance for large-scale transition projects.
Nigeria’s oil story is not over. But unless the country embeds ESG principles into its economic and energy strategy, it risks writing its next chapter from a position of decline rather than leadership.
Sarah Esangbedo Ajose-Adeogun is the Founder and Managing Partner at Teasoo Consulting. She is a former Community Content Manager at Shell Petroleum Development Company and served as the Special Adviser on Strategy, Policy, Projects and Performance Management to the Government of Edo State. She is also the host of the #SarahSpeaks podcast on YouTube @WinningBigWithSarah, where she shares insights on leadership, strategy, and sustainable growth.
