Nigeria offers oil tax relief for cost-cutting measures

Nigerian President Bola Tinubu has signed an executive order introducing a performance-driven framework for oil sector operators, designed to link tax incentives directly to verifiable cost savings.

Under the new Upstream Petroleum Operations Cost Efficiency Incentives Order 2025, operators who successfully implement industry-standard cost reductions in onshore, shallow-water and deep offshore fields will qualify for defined tax relief.

These tax credits will be capped at 20% of an operator's annual tax liability.

"This order is a signal to the world: we are building an oil and gas sector that is efficient, competitive, and works for all Nigerians," Tinubu said in a statement.

"It is about securing our future, creating jobs, and making every barrel count."

Analysts say success will largely be dependent on implementation.

"President Tinubu referred in the announcement to the importance of alignment between government agencies. Succeed there and this could be highly significant towards improving Nigeria's investment appeal," said Clementine Wallop, director for sub-Saharan Africa at Horizon Engage.

This order is a key component of the government's ongoing reforms aimed at boosting competitiveness within the sector.

Last year Nigeria offered a 25% gas utilisation investment allowance for equipment and plant for new and ongoing projects, and began streamlining contracting processes as part of commercial enablers to make offshore drilling more attractive.

These incentives, while they haven't yielded investments in a new field, have spurred a few producers to return to existing fields.

Reuters