A major shift was initiated with the signing of the Upstream Petroleum Operations Cost Efficiency Incentives Order 2025, a groundbreaking decree that ties tax benefits directly to operational cost reductions in onshore, shallow, and deep offshore oil operations. Under this scheme, operators who demonstrate high levels of efficiency can claim tax credits of up to 20% of their annual tax liability a first in the region. By setting measurable performance benchmarks, the reform aims to reward companies that streamline their operations while enhancing Nigeria’s competitiveness in a global landscape where traditional oil majors are gradually pulling out.

Before 2023, Nigeria faced a sharp decline in upstream investment, with annual spending plummeting by 74% from $27 billion in 2014 to under $6 billion in 2022. This slump was largely attributed to a cumbersome regulatory environment, fiscal uncertainty, and growing competition from regional players like Angola and Ivory Coast. Since taking office, the Tinubu administration has moved swiftly to overhaul the sector’s fiscal framework. The results are already showing: three of Africa’s four final investment decisions (FIDs) in oil for 2024 were made in Nigeria, representing a total of over $5 billion.

Natural Gas: the cornerstone of Nigeria’s energy transition

The federal government has made natural gas the focal point of its energy transition strategy. In 2023, it introduced a 25% tax rebate on investments in gas infrastructure and streamlined procurement processes. These measures were further strengthened in February 2024, with three presidential directives that offer: Tax credits for non-associated gas projects, deductions for gas infrastructure investments, and specific incentives for deep offshore operations. In October, reforms were extended to midstream and downstream segments, including VAT exemptions, benefits for offshore production, and support for the adoption of LPG, small-scale LNG, compressed natural gas (CNG), and electric vehicles. …

With this comprehensive approach, Nigeria aims to draw in up to $10 billion for deepwater gas exploration while accelerating the development of local infrastructure for processing, transporting, and exporting gas. The broader strategy hinges on positioning gas as a transition fuel that aligns with ESG (Environmental, Social, and Governance) standards favored by Western investors. Clementine Wallop, Head of Sub-Saharan Africa at Horizon Engage, notes:

If inter-agency coordination continues, Nigeria could reclaim its status as the region’s top destination for energy investment.
Clementine Wallop

In today’s energy transition landscape, few African nations offer a fiscal regime as targeted and responsive as Nigeria’s. For investors seeking resilient and profitable ventures, the West African giant presents a rare combination of abundant resources, strong fiscal incentives, and clear political commitment. As oil majors restructure their portfolios to include lower-carbon assets, Nigeria is strategically positioning itself as a key destination for gas investment while still offering favorable conditions for traditional oil ventures.