NIGERIA ROLLS OUT TAX INCENTIVES TO ATTRACT INVESTORS FOR DEEP OFFSHORE & GAS PROJECTS
The Nigerian government has unveiled a range of new tax incentives aimed at deep offshore projects as part of its efforts to attract foreign investment and stimulate growth in the nation’s oil and gas sector. These measures are part of a revised fiscal framework designed to enhance Nigeria’s position as a preferred destination for energy investments.
According to a recent statement by Mohammed Manga, Director of Information and Public Relations, the new fiscal incentives include the VAT Modification Order 2024 and the Notice of Tax Incentives for Deep Offshore Oil and Gas Production, under the Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024. This directive, announced by the Minister of Finance, Wale Edun, aims to revitalize the sector by introducing a more investor-friendly tax regime.
The VAT Modification Order introduces exemptions for a variety of critical energy products and infrastructure, such as Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment. The Notice of Tax Incentives for Deep Offshore Oil & Gas Production also provides additional tax reliefs to encourage deeper offshore exploration and production.
Minister Edun stated that these incentives are expected to drive substantial new investments, lower production costs, and strengthen energy security while supporting Nigeria’s shift towards cleaner energy. He emphasized that these reforms are part of a broader strategy under President Bola Tinubu’s Policy Directives 40-42, aiming to position Nigeria’s deep offshore region as a leading hub for global oil and gas investments.
The minister further noted that these changes reflect the government’s commitment to enhancing sustainable growth and restoring Nigeria’s global competitiveness in the energy sector.
However, challenges remain. Dicalo Consulting Group’s research indicates that the rising cost of energy products—such as cooking gas, which now costs N16,000 for a 12.5kg cylinder—has strained households due to currency depreciation and inflationary pressures. In October 2023, the federal government had temporarily suspended VAT on diesel to mitigate these effects, but the measure expired in April 2024, putting additional pressure on consumers.
Nigeria’s oil sector has also faced dwindling foreign direct investment, compounded by the exit of major international oil companies like Shell, ExxonMobil, Eni, and TotalEnergies. Production has been severely impacted by issues of theft, vandalism, and years of underinvestment, leading to an output of less than one million barrels per day in April 2023—far below the country’s OPEC quota of 1.8 million barrels per day.
With these new incentives, the Nigerian government hopes to restore investor confidence, reverse declining production trends, and reestablish the country as a major player in the global oil and gas industry.
