Nigeria to unlock $10 billion deep-water investment with new oil and gas tax relief package

The Nigerian government is aiming to attract $5 to $10 billion in near-term investments for deep-water offshore operations through the recently introduced tax incentives in the oil and gas sector. 

This is contained in a statement on Thursday by the Special Adviser to the President on Energy and head of the Energy Office of the Presidency, Mrs. Olu Verheijen, in Abuja. 

The tax relief package which includes massive tax exemptions for diesel, Compressed Natural Gas (CNG) as well as cooking gas also includes fiscal incentives to support investments in deep offshore oil and gas.  

The Minister of Finance, Wale Edun, rolled out these measures on Tuesday, including the first fiscal framework for deep-water gas basin exploration since 1991.  

Reacting to the new tax incentive, Verheijen said:  

“Since Nigeria’s last deepwater project – the Egina project – was approved in 2013, International Oil Companies operating in Nigeria have committed more than $82 billion in deepwater investments to other countries that they deem more competitive. 

“Over the next few years, they plan to spend another $90 billion to develop deepwater oil and gas projects. This is the pool of funds that our reforms are targeting, and we intend to unlock between $5 billion to $10 billion of new investments in Nigeria in the near- to medium-term.” 

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On his part, Osagie Okunbor, Chairman of the Oil Producers Trade Section, highlighted the significant improvements in policy coordination, stating: 

“The level of coordination and policy coherence we’re seeing today is unprecedented. The accelerated pace of reforms over the past year has renewed our interest in Nigeria.”  

Similarly, Rosario Osobase, Chairperson of the Petroleum Contractors Trade Section, emphasized the positive shift in the industry.  

“For the first time in a long while, we’re seeing positive momentum in our industry in Nigeria, thanks to the Presidential Directives and the government’s deliberate efforts to engage the service sector,” Osobase said.  

Backstory 

Nairametrics previously reported that the federal government the introduced tax reliefs for deep offshore oil and gas projects in the country as well as VAT exclusion on LPG, CNG, diesel and others. 

The Ministry of Finance disclosed this via its official handle on X stating that the fiscal incentives were aimed at boosting investments in the oil and gas sector. 

The orders from the Ministry are titled; Value Added Tax (VAT) Modification Order 2024 and Notice of Tax Incentives for Deep Offshore Oil & Gas Production, in accordance with the Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024. 

What you should know 

Since President Tinubu took office in May 2023, the federal government has introduced a range of reforms aimed at boosting the competitiveness of Nigeria’s oil and gas industry, while reducing the costs and timeframes involved in conducting business within the sector.  

As the country’s largest source of foreign exchange, the oil and gas industry remains critical to Nigeria’s economy.  

Key among these reforms are three presidential directives issued in February 2024, which are expected to generate tens of thousands of new jobs, enhance foreign exchange earnings, stimulate tax revenue, and contribute to the nation’s macroeconomic stability.