Stakeholders demand review of Nigeria’s investment treaties over environmental, energy transition risks

Civil society organisations, host-community representatives, researchers and other stakeholders have called on the federal government to review Nigeria’s bilateral investment treaties, warning that investor-protection provisions could constrain the country’s ability to enforce environmental regulations and pursue its energy transition policies.

The stakeholders made the call in a communiqué issued at the end of a multi-stakeholder roundtable on Investor-State Dispute Settlement (ISDS), energy transition and investment governance in Nigeria held in Port Harcourt, Rivers State, on 16 September.

The roundtable was convened by Policy Alert in partnership with the Social Development Integrated Network and ActionAid, with support from the Centre for Research on Multinational Corporations.

The participants focused particularly on ISDS provisions contained in Nigeria’s bilateral investment treaties, including the 1992 Nigeria-Netherlands Bilateral Investment Treaty (BIT).

ISDS is a mechanism that allows foreign investors to challenge certain government measures through international arbitration where they contend that their treaty-protected investment rights have been breached.

Treaty obligations and environmental regulation

According to the communiqué, participants expressed concern that the provisions could create what they described as a “chilling effect” on the government’s willingness to introduce or enforce environmental and climate regulations because of the possibility of arbitration claims by investors.

They argued that the issue has become more significant as Nigeria attempts to balance continued investment in oil and gas with its stated commitment to an energy transition.

The participants identified Shell’s offshore investments in the Bonga field, the federal government’s Decade of Gas initiative and the continuing divestment of oil assets in the Niger Delta as developments that could expose the country to additional investment-related disputes.

They said the Bonga investment, in particular, illustrated the need for Nigeria to examine the potential legal consequences of its treaty commitments.

The stakeholders’ position follows renewed investment by Shell in Nigeria’s deepwater sector. In December 2024, Shell and its partners announced a final investment decision on the $5 billion Bonga North deepwater project, which PREMIUM TIMES reported was expected to increase Nigeria’s oil production capacity by about 110,000 barrels per day.

PREMIUM TIMES also reported that Shell announced a $2 billion offshore gas project with Sunlink Energies and Resources Limited, expected to supply gas to Nigeria LNG when completed.

The participants said such investments could become relevant to future disputes if subsequent government measures affect investors’ interests protected under applicable investment treaties.

Gas transition

The communiqué also questioned the legal and fiscal implications of Nigeria’s Decade of Gas initiative, arguing that the expansion of gas infrastructure could increase the volume of foreign investment potentially protected by investment treaties.

The stakeholders said this could create additional exposure to arbitration claims while potentially committing the country to fossil-fuel infrastructure for decades.

The federal government has presented gas as a key component of Nigeria’s energy transition and energy security strategy.

PREMIUM TIMES reported in July that the government had launched the National Grassroots LPG Penetration Programme as part of the Decade of Gas initiative, with the stated objective of expanding access to cooking gas across the country.

Government officials have also described domestic gas as central to Nigeria’s plans to expand energy access, power generation and industrial development.

The roundtable participants, however, said the government should assess the investment-treaty implications of expanding gas infrastructure before committing to further investments.

They recommended that the Federal Government conduct a comprehensive assessment of the potential ISDS exposure associated with the Decade of Gas initiative.

Oil divestments

The stakeholders also linked ISDS concerns to the wave of oil asset divestments by international oil companies in the Niger Delta.

They argued that multinational companies exiting onshore operations while retaining offshore interests could create difficult questions over responsibility for historical pollution and environmental remediation.

The concerns follow growing scrutiny of oil-company divestments in Nigeria.

In March 2025, the Nigeria Extractive Industries Transparency Initiative said it would review 26 oil blocks valued at $6.03 billion involved in divestment transactions by five international oil companies, citing environmental concerns and other unresolved issues.

More recently, four organisations filed a lawsuit over TotalEnergies’ planned divestment, raising concerns about environmental liabilities and the lack of public disclosure concerning financial guarantees for remediation and compensation.

A separate PREMIUM TIMES report in July detailed internal Shell documents that, according to Amnesty International and partner organisations, put the company’s estimated onshore decommissioning liability at $10.9 billion, excluding environmental remediation. The report also raised questions about how legacy environmental liabilities would be addressed following Shell’s exit from onshore operations.

The Port Harcourt stakeholders said ISDS provisions could complicate attempts by the Nigerian government to impose post-divestment environmental obligations on foreign investors.

They called on the Nigerian Upstream Petroleum Regulatory Commission to establish binding requirements ensuring that companies settle or adequately secure legacy environmental liabilities before completing divestments.

Nigeria-Netherlands BIT

The 1992 Nigeria-Netherlands BIT featured prominently in the discussions.

The participants said Nigeria should review and, where necessary, renegotiate existing bilateral investment treaties to ensure that treaty obligations do not undermine the government’s authority to regulate in the public interest.

The issue of Nigeria’s exposure to international investment arbitration is not theoretical.

In the long-running OPL 245 dispute, Italian energy companies Eni-linked entities initiated arbitration proceedings against Nigeria at the International Centre for Settlement of Investment Disputes, arguing that delays in converting the licence breached obligations under the Nigeria-Netherlands BIT.

The Attorney-General of the Federation, Lateef Fagbemi, said in March that Nigeria had faced potential liability exceeding $2 billion in damages and associated costs in connection with the dispute. The Federal Government is now pursuing an arrangement intended to resolve the outstanding arbitration proceedings.

The case shows how disputes involving investments in Nigeria’s petroleum sector can extend beyond domestic courts and become matters of international arbitration.

Calls for treaty reform

The stakeholders recommended that future investment treaties contain explicit safeguards protecting Nigeria’s right to regulate on environmental protection, remediation and climate action without facing arbitration claims.

They also called for relevant provisions of the Petroleum Industry Act to be reviewed and strengthened, particularly those dealing with environmental remediation, host-community obligations and regulatory enforcement.

The participants further recommended that investment agreements entered into by Nigeria should be consistent with domestic laws and should not override national environmental, fiscal or regulatory standards.

They called for greater transparency around investment disputes, including public disclosure of pending and concluded ISDS claims involving Nigeria.

The stakeholders also urged government agencies negotiating or renewing investment treaties to conduct meaningful consultations with civil society and affected communities before agreements are ratified.

READ ALSO: IEA says Nigeria’s energy investment could double in five years

They further called for the National Assembly to play a formal role in the negotiation and ratification of investment agreements and treaties.

Another key recommendation was that Nigeria should pursue the removal of ISDS clauses from its investment treaties and agreements going forward.

Communities and environmental liabilities

The communiqué said the reform of Nigeria’s investment treaty framework should ultimately be linked to the protection of communities affected by oil and gas operations.

The participants argued that Niger Delta communities should not be left to bear the cost of environmental damage resulting from investments that benefit corporations and government.

The roundtable participants also called for sustained training for civil society organisations, host communities and journalists to enable them to investigate and report on ISDS, investment governance and energy transition issues.

They said Nigeria’s climate and energy-transition commitments would ultimately depend not only on government policy declarations or new energy investments, but also on whether the country’s investment treaties preserve its ability to regulate in the public interest.