President Bola Ahmed Tinubu has signed the Upstream Petroleum Operations Cost Efficiency Incentives Order (2025), a landmark Executive Order designed to slash project costs, attract both domestic and foreign investment, and secure higher government revenues. Announced today, this transformative policy is poised to reposition Nigeria as a competitive player in the global oil and gas market, addressing long-standing challenges that have hindered the sector’s growth.
A Strategic Response to Industry Challenges
Nigeria, Africa’s largest oil producer, has faced significant hurdles in its oil and gas sector in recent years. Despite its vast reserves, the country captured only 5% of Africa’s oil and gas investments in 2023, a stark contrast to its potential. High operating costs, prolonged project timelines, oil theft, pipeline vandalism, and regulatory inefficiencies have made Nigeria less attractive compared to other oil-producing nations. The new Executive Order directly tackles these issues, building on reforms initiated in 2024 to create a more investor-friendly environment.
President Tinubu, speaking at the signing ceremony in Abuja, emphasized the order’s significance: “This Executive Order is a signal to the global investment community that Nigeria is open for business. We are committed to creating an oil and gas sector that is efficient, competitive, and sustainable, delivering value to our people and our partners.”
Key Provisions of the Executive Order
The Upstream Petroleum Operations Cost Efficiency Incentives Order (2025) introduces a performance-based framework to incentivize cost efficiency in Nigeria’s upstream oil and gas operations. Here’s a detailed breakdown of its core components:
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Performance-Based Tax Incentives:
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The order rewards upstream operators who achieve verifiable cost savings with tax credits. These savings must align with industry benchmarks tailored to specific terrain types: onshore, shallow water, and deep offshore.
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The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will publish these benchmarks annually, ensuring transparency and adaptability to global standards.
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To balance incentives with fiscal responsibility, tax credits are capped at 20% of a company’s annual tax liability, safeguarding government revenues while encouraging efficiency.
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Reducing Operating Costs:
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Nigeria’s upstream operating costs have historically been higher than global averages, deterring investment. The Executive Order targets these inefficiencies by tying financial rewards to measurable cost reductions.
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By aligning costs with international benchmarks, the policy aims to make Nigeria’s oil and gas projects more economically viable, particularly in the capital-intensive deep offshore segment.
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Attracting Investment:
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The order builds on 2024 fiscal and regulatory reforms, including improved fiscal terms, shorter project approval timelines, and streamlined local content requirements that align with global best practices.
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These changes are designed to make Nigeria a more attractive destination for both domestic and foreign investors, reversing the trend of capital flight to other African nations like Angola and Ghana.
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Securing Government Revenue:
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While incentivizing cost efficiency, the order ensures that Nigeria’s fiscal interests are protected. The 20% tax credit cap prevents excessive revenue losses, allowing the government to benefit from a revitalized sector.
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Increased investment and production are expected to boost royalties, taxes, and other revenue streams, supporting Nigeria’s economic growth.
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Why This Matters for Nigeria
The oil and gas sector remains the backbone of Nigeria’s economy, accounting for over 80% of export earnings and a significant portion of government revenue. However, the sector has faced persistent challenges that have eroded its competitiveness:
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High Costs: Operating costs in Nigeria’s upstream sector have been among the highest globally, driven by inefficiencies, regulatory bottlenecks, and security issues.
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Declining Investment: In 2023, Nigeria attracted just $3 billion of the $60 billion invested in Africa’s oil and gas sector, a decline attributed to unattractive fiscal terms and operational risks.
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Security Threats: Oil theft and pipeline vandalism have reduced output, with Nigeria struggling to meet its OPEC production quotas in recent years.
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Global Competition: Other African nations have capitalized on Nigeria’s challenges, offering more competitive terms to attract international oil companies.
The Executive Order addresses these issues head-on, signaling Nigeria’s determination to reclaim its position as a leading destination for oil and gas investment. By fostering cost efficiency and transparency, the policy aims to create a win-win scenario for investors and the Nigerian government.
Implementation and Next Steps
The Executive Order will take effect on April 30, 2025, giving stakeholders time to prepare for its implementation. The NUPRC will soon release detailed guidelines outlining the process for verifying cost savings, applying tax credits, and monitoring compliance. Industry experts expect these guidelines to provide clarity on how benchmarks will be set and how operators can qualify for incentives.
The government is also working to address complementary issues, such as improving security in the Niger Delta to curb oil theft and vandalism. Investments in pipeline infrastructure and technology are expected to enhance production efficiency, further supporting the goals of the Executive Order.
Industry Reactions
Early reactions from industry stakeholders have been overwhelmingly positive. The Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry praised the order as a “game-changer” for Nigeria’s upstream sector. “This policy shows that the government is listening to the industry’s concerns and taking decisive action to address them,” said an OPTS spokesperson.
International oil companies, including Shell and ExxonMobil, have expressed cautious optimism, noting that the success of the order will depend on transparent implementation and sustained government commitment. Local operators, such as Seplat Energy, have also welcomed the policy, highlighting its potential to level the playing field for indigenous companies.
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