The federal government has introduced tax reliefs for deep offshore oil and gas projects in the country as well as VAT exclusion on LPG, CNG, diesel and others.
The Ministry of Finance disclosed this via its official handle on X stating that the fiscal incentives were aimed at boosting investments in the oil and gas sector.
The orders from the Ministry are titled; 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.
The VAT Modification Order 2024 exempts key energy products like Diesel, LPG, CNG, and clean energy infrastructure, such as electric vehicles and clean cooking equipment, from VAT.
According to the Ministry, these exemptions aim to reduce living costs, improve energy security, and support Nigeria’s shift to cleaner energy.
The Notice of Tax Incentives for Deep Offshore Oil & Gas Production introduces new tax reliefs to attract global investments to Nigeria’s deep offshore projects.
The statement from the Ministry noted that the tax reliefs are Part of President Bola Ahmed Tinubu’s broader policy reforms and measures which aim to boost the energy sector and strengthen Nigeria’s global competitiveness in oil and gas.
What the Federal government is saying “The Honourable Minister of Finance and Coordinating Minister of the Economy Mr. Wale Edun has unveiled two major fiscal incentives aimed at revitalizing Nigeria’s oil and gas sector:”
- Value Added Tax (VAT) Modification Order 2024
- ”Notice of Tax Incentives for Deep Offshore Oil & Gas Production, in accordance with the Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024.”
“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, bolster energy security, and accelerate Nigeria’s transition to cleaner energy sources.”
What you should know
In recent times, the cost of cooking gas and other energy products has increased significantly due to currency weakness and other inflationary pressures. Recent checks by Nairametrics reveal that the cost of filling a 5kg cylinder has risen to almost N7000.
In October last year, the federal government excluded VAT collection from diesel over the increase in prices and impact on inflation. However, the exclusion was just for six month and the order expired in April, 2024.
Declining investment in the oil and gas sector
Furthermore, Nigeria’s oil and gas sector has not seen significant investment in the past decade owing to inconsistent government policies and regulation. In contrast, the industry has seen significant divestment from International Oil Companies (IOCs) such as Shell, ExxonMobil, ENI and others from onshore fields.
Offshore fields have proven to be more attractive to these IOCs in the past years due to relatively reduced risks and higher reserves. Nigeria has an estimated 200 trillion cubic feet of gas reserves as of 2023.