Nigeria Introduces Tax Incentives to Boost Oil Sector Efficiency

In a move to enhance efficiency and attract investment in the oil sector, President Bola Tinubu has signed the Upstream Petroleum Operations Cost Efficiency Incentives Order 2025.

The executive order offers tax credits of up to 20% of annual tax obligations to oil operators who achieve verifiable cost savings in their operations. The incentives apply to operators in onshore, shallow water, and deep offshore oil fields.

To qualify, companies must implement industry-standard cost reduction measures and demonstrate their effectiveness through recognized benchmarks. President Tinubu stated that the initiative is part of a broader effort to create a more competitive and efficient oil and gas industry that benefits all Nigerians. He emphasized the need for alignment among government agencies to ensure the successful implementation of the order.

Analysts have noted that while previous reforms, such as a 25% gas utilization investment allowance and streamlined contracting procedures, have encouraged some producers to re-engage with existing projects, the new order could further enhance Nigeria’s investment appeal if effectively implemented.

The government’s ongoing reforms aim to rejuvenate the energy sector, attract more investment, and ensure that the country’s vast oil and gas resources contribute meaningfully to national development.