President Bola Tinubu signed the “Upstream Petroleum Operations (Cost Efficiency Incentives) Order, 2025”, to end the high operating costs in the Nigerian oil and gas sector, compared to global average.
This is contained in a document obtained by our Correspondent from the Office of the Special Adviser to the President on Energy in Abuja.
According to the document, the high operating cost arose mainly from prolonged project execution timelines and local content requirements.
“The President, in response to the high operating costs, issued policy directives on the reduction of oil and gas sector operating costs, contracting timelines and local content compliance requirements
“The Federal Government of Nigeria is committed to efficient management of petroleum resources and reduction of costs in upstream petroleum operations to enhance competitiveness and efficiency.
“It has become necessary to provide additional measures to promote fiscal discipline, reduce operating costs and maximise Nigeria’s economic gains from the upstream petroleum operations.
“This will be done through monitoring
mechanisms and appropriate regime of incentives,” the document read in part.
The order was issued in exercise of the powers conferred on the President by section 5 (1) of the 1999 Constitution.
The order was also in line with the powers of the President in sections 23 (2) and 89 of the Companies Income Tax Act, Cap C21, Laws of the Federation of Nigeria, 2004.
“The incentives established pursuant to this Order shall cease to have effect on the 31st day of May 2035, unless extended or otherwise modified by the President.
“If any tax credit granted but not utilised by any lessee or licensee on the expiration date shall become invalid and unenforceable,”
In a statement issued on Friday, by Mrs Olu Verheijen, Special Adviser to the President on Energy, she said the order introduces performance-based tax incentives for upstream operators who deliver verifiable cost savings that meet defined industry benchmarks.
The Special Adviser said that the Order returns to investors 50 per cent of incremental government gain resulting from cost savings
She said the order also caps available tax credits at 20 per cent of a company’s annual tax liability—protecting government revenues while still offering strong fiscal terms to incentivize efficient operators.
“This is not a pursuit of cost reduction for its own sake. It is a deliberate strategy to position Nigeria’s upstream sector as globally competitive and fiscally resilient.
“With this reform, we are rewarding efficiency, strengthening investor confidence, and ultimately delivering greater value to the Nigerian people.
“The new Order builds on the administration’s 2024 presidential reform directives which delivered improved fiscal terms, shortened project timelines, and aligned local content policies with global best practice,” she said.
Verheijen said the President haf tasked her office to lead inter-agency coordination of the order to ensure effective implementation and translation into measurable outcomes..
