Nigeria stands to gain tremendously from the newly introduced fiscal incentives meant to shore up the oil and gas sector.
The Federal Government on Wednesday released a new set of fiscal incentives and concessions designed and tailored towards shoring up operations in the entire nation’s oil and gas industry
The new tax reliefs for deepwater offshore projects, Exemption of VAT on AGO, LPG, Electric vehicles, and Compressed Natural gas are expected to bring numerous benefits to Nigeria’s economy.
The fiscal incentives cut across upstream, midstream and downstream sectors of the economy.
Wale Edun, Minister of Finance and Coordinating Minister of the Economy, who unveiled the two major fiscal incentives, Wednesday, said they were part of overall measures to revitalise Nigeria’s oil and gas sector:
The fiscal incentives include 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.
These incentives when implemented will bring tremendous benefits such as the following:
The new tax reliefs for deepwater offshore projects in Nigeria are expected to bring numerous benefits to the country’s economy and oil industry.
Increased Investment and Economic Growth
The tax incentives will attract more foreign investors, like Emirates, to Nigeria’s oil and gas sector, boosting economic growth and development ¹. This is crucial for Nigeria, as the country aims to diversify its economy and reduce dependence on oil exports.
Job Creation and Local Content Development
The tax reliefs will also lead to increased job opportunities for Nigerians, both directly and indirectly, in the oil and gas sector. Additionally, the incentives will promote local content development, encouraging
Economic Benefits
The tax incentives will attract investments for deepwater oil and gas projects, aiming for a competitive internal rate of return (IRR) ¹. This will lead to increased economic activity, job creation, and government revenue.
Environmental Benefits
The exemption of VAT on LPG, Electric vehicles, and Compressed Natural gas will encourage the adoption of cleaner energy sources, reducing carbon emissions and environmental pollution ² ³. LPG, in particular, reduces sulfur oxide emissions by 97% and particulate matter by 90% [5).
Industry Growth
The tax reliefs will promote the growth of Nigeria’s oil and gas industry, with potential spending on fabrication and manufacturing ⁴. This will stimulate local economic development, especially in areas new to oil and gas development.
Increased Competitiveness
The tax incentives will make Nigeria’s deepwater offshore projects more competitive globally, attracting international investors and companies ¹. This will enhance the country’s reputation as a favorable investment destination.
Overall, the new tax reliefs are expected to boost Nigeria’s economy, reduce environmental pollution, and promote industry growth.
A statement issued by the Director, Information and Public Relations, Federal Ministry of Finance, Mohammed Manga explained that the VAT Modification Order 2024 introduces exemptions on a range of key energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
“These measures are designed to lower the cost of living, encourage energy security, and accelerate Nigeria’s transition to cleaner energy sources.
“In addition, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production provides new tax reliefs for deep offshore projects. This initiative is aimed at positioning Nigeria’s deep offshore basin as a premier destination for global oil and gas investments.
“These reforms are part of a broader series of investment-driven policy initiatives championed by His Excellency, President Bola Ahmed Tinubu, in line with Policy Directives 40-42.
“They reflect the administration’s strong commitment to fostering sustainable growth in the energy sector and enhancing Nigeria’s global competitiveness in oil and gas production,” the statement said.
It stressed that “with these bold initiatives, Nigeria is firmly on track to reclaim its position as a leader in the global oil and gas market,” adding that “these fiscal incentives demonstrate the administration’s unwavering commitment to fostering sustainable growth, enhancing energy security, and driving economic prosperity for all Nigerians.”