President Bola Tinubu-Oil Sector Reforms to Boost Investment

On May 30, 2025, President Bola Tinubu signed the Upstream Petroleum Operations Cost Efficiency Incentives Order 2025. This executive order offers tax credits of up to 20% to oil operators who achieve significant cost savings, aiming to enhance efficiency and attract investment in Nigeria's oil sector.

The executive order introduces incentives to oil and gas companies operating in Nigeria, aimed at:

• Reducing the high cost of upstream operations (exploration and production),

• Attracting both foreign and local investment,

• Enhancing Nigeria’s competitiveness in the global energy market.

Key Provisions

• Tax credits of up to 20% for oil operators who meet efficiency benchmarks.

• Incentives tied to measurable cost-saving practices (e.g., reduction in unit operating cost).

• Encouragement of local content and technological innovation to reduce dependence on imports.

Expected Benefits

1. Increased Foreign Direct Investment (FDI)

• More favorable tax regimes will attract international oil companies (IOCs) and private equity investors.

• Greater investor confidence in Nigeria's regulatory environment.

2. Boost in Oil Production

• Operators will be encouraged to reinvest cost savings into exploration and field development.

• Dormant or marginal fields may be revived due to lower operating costs.

3. Revenue Growth for Government

• While tax credits reduce short-term tax receipts, the increase in production and economic activity will likely result in higher total revenue from royalties, permits, and taxes.

4. Job Creation and Skills Development

• Increased exploration and production activities will generate direct and indirect employment opportunities across Nigeria.

• Emphasis on cost efficiency may lead to investment in local workforce training and technology transfer.