Tinubu signs order to cut costs, boost Nigeria’s oil investment
President Bola Tinubu has enacted an Executive Order aimed at lowering expenses in oil and gas initiatives, boosting government income, and accelerating investment into Nigeria’s energy sector.
As stated in a release on Thursday from the Office of the Special Adviser to the President on Energy, the order introduces extensive fiscal reforms focusing on cost-efficiency, operational responsibility, and maximizing the value for the nation.
Entitled “Putting Every Barrel to Work: Nigeria’s New Presidential Directive on Cost Efficiency Targets New Investments, Improved Revenues and National Value,” the order sets a challenging agenda to manage production expenses while offering globally competitive conditions to draw in serious investors.
The statement emphasizes a crucial provision that limits tax credits to a maximum of 20 percent of a company's yearly tax obligation.
The government clarified that this initiative is intended to protect public revenues while still incentivizing efficiency and responsible operations in the upstream sector. This Order will be effective from April 30, 2025.
The Upstream Petroleum Operations Cost Efficiency Incentives Order (2025) also brings forth performance-based tax incentives for upstream operators who can demonstrate comparable cost savings that align with established industry standards.
An official gazette mentioned, “Operating expenses in Nigeria's oil and gas sector have been observed to surpass global averages, primarily due to extended project timelines and local content demands. The President has issued policy directives in response to these elevated operational costs to reduce costs, streamline contracting periods, and adjust local content compliance requirements in the oil and gas sector.
“The Federal Government of Nigeria is dedicated to efficient petroleum resource management and lowering petroleum costs in the upstream sector to boost competitiveness and efficiency; thus, additional measures are necessary to foster fiscal discipline, cut operational costs, and enhance Nigeria's economic benefits from upstream petroleum activities through monitoring mechanisms and a suitable incentive framework.”
The Order also instructs the Nigerian Upstream Petroleum Regulatory Commission to release annual benchmarks categorized by terrain: onshore, shallow water, and deep offshore.
Each year, the Commission will carry out evaluations and benchmarking studies to define relevant cost benchmarks for upstream operations and Unit Operating Costs across the different terrains. These benchmarks will follow guidelines provided under the Petroleum Industry Act. Prior to issuing these guidelines, the Commission will engage with relevant stakeholders and disclose the methodology utilized for the annual benchmarking.
“With the goal of reducing the overall cost structure of petroleum operations, the Order will assign annual specific Unit Operating Cost reduction targets for each terrain, accounting for the distinctive aspects of their operating environments and production volumes; and will conduct yearly reviews coinciding with the tax assessment cycle of the lessee’s or licensee’s performance, where the main assessment metric will be the Unit Operating Costs to evaluate compliance with established targets,” it stated.
Additionally, comprehensive implementation guidelines for the new Order will be released at a later date. Key provisions of the Order include the cap on tax credits at 20 percent of a company’s annual tax duty, which helps protect government revenue while offering appealing fiscal conditions to motivate efficient operators.
“Nigeria must draw investment inflows not as an act of charity, but because investors are persuaded by genuine and lasting value. This Order communicates to the global community: we are developing an oil and gas sector that is efficient, competitive, and benefits all Nigerians. It is about securing our future, generating jobs, and maximizing the value of every barrel,” asserted President Tinubu.
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