Despite accounting for over 60 per cent of West Africa’s $80 billion oil market, Nigeria’s cost of drilling per barrel remains 40 to 50 per cent higher than those of other regional producers, according to a new report by Deloitte, a global audit and consulting firm.
The report also projected that West Africa’s oil and gas market will record a compound annual growth rate (CAGR) of 6.5 per cent between 2025 and 2033, driven primarily by Nigeria and Ghana, which together contribute about 80 per cent of the market’s total value.
While highlighting the region’s growing importance in Africa’s energy landscape and its rising global influence, Deloitte identified five major challenges hindering the sector’s growth limited access to funding for independent producers, high operational costs, persistent security threats, regulatory bottlenecks, and poor infrastructure.
“West Africa is one of the most expensive regions in the world to drill, making it more difficult for African producers, especially in Nigeria, to compete globally,” the report stated. “Nigeria’s operating costs are estimated to be 40 to 50 per cent higher than in comparable oil-producing jurisdictions due to insecurity in production areas, complex procurement rules, local content requirements, and high insurance costs for foreign contractors.”
According to Deloitte, these factors significantly inflate project expenses without yielding equivalent gains in productivity or efficiency. While local content laws are designed to promote domestic capacity-building, the report noted that they often increase costs when inputs or services are unavailable locally.
“This mismatch creates tension between producers and governments,” the report said. “In some cases, firms must procure materials offshore after unsuccessful local sourcing attempts, or rely on intermediaries to meet local content rules.”
The report further revealed that Nigerian President Bola Ahmed Tinubu recently issued executive orders aimed at simplifying procurement processes and addressing cost inflation linked to local content regulations.
To improve efficiency and competitiveness, Deloitte said oil companies in the region are increasingly turning to digital tools and data analytics to streamline operations, finance, and supply chain management.
The report also pointed to recent reforms including Nigeria’s Petroleum Industry Act (PIA) and the creation of the $5 billion Africa Energy Bank (AEB) as key efforts to enhance regulatory clarity, expand funding access, and strengthen investor confidence.
Deloitte concluded that sustained public-private collaboration, digital transformation, and regulatory consistency are essential to achieving sustainable growth and energy security across West Africa’s oil and gas sector.
