June 2, 2025/CSL Research
As part of broader strategic efforts to rejuvenate the oil and gas sector, President Bola Tinubu last week signed an executive order aimed at lowering project execution costs, boosting revenue generation from oil and gas activities, and strengthening the country’s appeal to both local and international investors
. Specifically, the new directive – titled the Upstream Petroleum Operations Cost Efficiency Incentives Order (2025) – introduces performance-based tax incentives for upstream operators alongside other initiatives.
The key provisions of the executive order include:
• Performance-Based Tax Incentives: Oil and gas operators that successfully achieve cost reductions aligned with industry benchmarks will be eligible for defined tax reliefs.
• Terrain-Specific Cost Benchmarks: The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is mandated to publish annual cost benchmarks for operations across various terrains, including onshore, shallow water, and deep offshore.
• Credit Caps to Safeguard Revenues: To maintain fiscal prudence, tax credits granted under these incentives will be capped at 20% of an operator’s annual tax liability.
We believe these measures represent a careful balancing act between stimulating upstream investment and safeguarding Nigeria’s oil revenue base. By creating a clear and measurable link between cost efficiency and access to tax incentives, the reforms are expected to motivate upstream operators to adopt more disciplined practices. In addition, by capping the allowable tax credits at a defined percentage of annual liabilities, the government ensures that these incentives do not undermine fiscal stability or compromise public revenue.
It is important to note that this reform builds on earlier measures introduced by the Tinubu administration in 2024, which included the introduction of more competitive fiscal terms, accelerated contracting cycles, and the alignment of local content policies with international best practices. These reforms are part of a broader strategy aimed at attracting up to US$20 billion in oil and gas investments – equivalent to approximately 11% of Nigeria’s GDP.
While uncertainty remains around the exact scale and timing of these capital inflows, the cumulative impact of sustained market-oriented reforms – coupled with recent regulatory approvals, such as the long-awaited clearance for International Oil Companies (IOCs) like ExxonMobil to divest certain onshore assets – signals a meaningful shift toward a more flexible, investor-friendly policy environment. We note that by addressing long-standing challenges such as high project execution costs, regulatory bottlenecks, and investment uncertainty, the administration is laying a more credible foundation for attracting large-scale, long-term foreign direct investment (FDI) into Nigeria’s oil and gas sector.
Click here to download full report: CSL Nigeria Daily – 02 June 2025 – Oil.pdf
