President Bola Ahmed Tinubu has signed the Upstream Petroleum Operations Cost Efficiency Incentives Order (2025), a landmark executive order designed to slash operating costs, attract unprecedented investments, and maximize revenue returns in the nation’s vital energy sector. Announced on May 30, 2025, this policy is being hailed as a game-changer, signaling Nigeria’s commitment to reviving investor confidence and driving economic growth through one of its most critical industries.
A Strategic Vision for Nigeria’s Energy Future
Nigeria, Africa’s largest oil producer, has long grappled with challenges in its upstream oil and gas sector, including high operating costs, prolonged project timelines, and complex local content requirements. These hurdles have often deterred investors and limited the country’s ability to fully capitalize on its vast hydrocarbon reserves. President Tinubu’s latest executive order directly addresses these pain points, introducing a performance-based framework that incentivizes efficiency while ensuring fiscal responsibility.
The new order, effective from April 30, 2025, establishes a system of tax incentives for upstream operators who achieve verifiable cost savings in line with industry benchmarks set annually by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). These benchmarks, tailored to different operational terrains—onshore, shallow water, and deep offshore—provide a clear roadmap for companies to optimize their processes. Operators who meet or exceed these standards will be eligible to retain up to 50% of the incremental government revenue generated from their cost-saving measures. To balance these generous incentives with Nigeria’s fiscal priorities, tax credits are capped at 20% of a company’s annual tax liability, ensuring a win-win for both investors and the government.
“This is a bold step to drive efficiency and revive investor confidence in Nigeria’s oil and gas sector,” President Tinubu declared during the signing ceremony. “By ensuring that every barrel counts, we are creating a competitive environment that will attract investment, create jobs, and secure Nigeria’s economic future.”
Building on a Legacy of Reform
The executive order is the latest in a series of reforms aimed at transforming Nigeria’s oil and gas industry. The Petroleum Industry Act (PIA) of 2021 laid the foundation by introducing a more transparent and investor-friendly regulatory framework. Subsequent directives in 2024 further streamlined operations, resulting in a significant uptick in investments, including $6.7 billion in 2024 alone. Notable projects include Renaissance Africa Energy’s ambitious $15 billion investment and ExxonMobil’s $1.5 billion commitment to develop the Usan deepwater oilfield.
The new order builds on these successes, with a clear focus on cost efficiency as a catalyst for growth. By incentivizing operators to reduce wasteful expenditure, the government aims to make Nigeria’s oil and gas sector more competitive on the global stage. The policy also aligns with Nigeria’s broader energy goals, including achieving 2 million barrels per day (bpd) in oil production and 12 billion standard cubic feet per day (bscf/d) in gas production, up from the current 7.3 bscf/d. These targets are critical to positioning Nigeria as a leading supplier of both oil and gas in Africa and beyond.
How the Order Works
The Upstream Petroleum Operations Cost Efficiency Incentives Order (2025) introduces a structured and transparent mechanism to drive efficiency. Here’s a breakdown of its key components:
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Performance-Based Incentives: Operators must demonstrate verifiable cost reductions that align with NUPRC’s annual benchmarks. These benchmarks are customized for different operational environments, recognizing the unique challenges of onshore, shallow water, and deep offshore projects.
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Revenue Sharing: Companies that achieve cost savings will be eligible to retain up to 50% of the incremental revenue generated for the government. This creates a direct financial incentive for operators to streamline their processes without compromising quality or safety.
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Tax Credit Cap: To ensure fiscal prudence, tax credits are limited to 20% of an operator’s annual tax liability. This cap prevents excessive tax breaks while still offering meaningful rewards for efficiency.
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Oversight and Implementation: The Special Adviser on Energy, Olu Verheijen, has been tasked with coordinating inter-agency efforts to ensure the order is implemented effectively. Detailed guidelines are expected to be released in the coming weeks, providing clarity on compliance and reporting requirements.
A Catalyst for Global Competitiveness
Industry experts have praised the order as a bold step toward aligning Nigeria’s oil and gas sector with global best practices. “This executive order sends a clear message to investors: Nigeria is serious about creating a business-friendly environment,” said Dr. Adeola Adenikinju, an energy economist at the University of Ibadan. “By tying incentives to performance, the government is ensuring that both the nation and investors benefit from improved efficiency.”
The order comes at a critical time, as global energy markets face increasing competition and a shift toward cleaner energy sources. Nigeria’s ability to optimize its oil and gas operations will determine its ability to maintain its position as a leading energy producer while transitioning to a more sustainable energy future. The government’s focus on gas production, in particular, aligns with global demand for cleaner fuels, positioning Nigeria to capitalize on the growing liquefied natural gas (LNG) market.
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