The Recent Executive Instruments in the Nigerian Oil and Gas Industry

President Bola Ahmed Tinubu (“The President”) signed an executive policy directive (referred to as “The Directives”) on March 6, 2024, to revive Nigeria’s oil and gas industry and remove barriers to foreign investment. Nigeria is intended to be the go-to location for oil and gas industry investments in Africa by utilizing its resources, thanks to these directives.

The main points of the President’s orders are covered in this newsletter.        

The President signed the following three directives: 

1. OIL AND GAS COMPANIES (TAX INCENTIVES, EXEMPTION, AND REMISSION, ETC.) ORDER 2024. 

The purpose of these incentives is to accelerate investments in the oil and gas sector through various means:

1. Tax Credits for Non-Associated Gas Greenfield Development.
2. Midstream Capital and Gas Utilization Investment Allowance.
3. Incentives for Deep-water Oil and Gas Projects.   

2. PRESIDENTIAL DIRECTIVE ON REDUCTION OF PETROLEUM SECTOR  CONTRACTING COSTS AND TIMELINES, 2024

To facilitate the ease of doing business and encourage investments in the Nigerian petroleum sector, the government has made changes to the contracting process. These changes address the current static system, which impedes on the ease of doing business, discourages potential investment and falls below global best practice. The reforms prioritize transparency and efficiency by streamlining approval procedures for contracts involving government-controlled companies and others within the sector. The contracting reforms include:

a.Financial Approval Threshold.

b.Consent Timelines.

c.Third-Party Contract Duration.     

3. LOCAL CONTENT COMPLIANCE REQUIREMENTS, 2024

Under the local content compliance requirements Directive, the Nigerian Content Development and Monitoring Board (NCMDB) is directed to consider two key factors when implementing the Nigerian Oil and Gas Industry Content Development Act. These factors are:

a.Insufficient In-Country Capacity: The NCMDB must recognize the limitations of current domestic capabilities for certain services. This ensures a pragmatic approach that avoids imposing unrealistic requirements.

b.Investment and Cost Competitiveness:  The NCMDB’s actions should not create unnecessary hurdles for investment or inflate project costs within the oil and gas sector. 

In Conclusion, the introduction of the Directives indeed represents a pivotal moment in Nigeria’s quest to revitalize its oil and gas sector. These Directives, spearheaded by the President, underscore the government’s unwavering commitment to fostering a conducive investment climate and positioning Nigeria as a premier destination for oil and gas investments in Africa. By introducing these strategic measures (as outlined above), these Directives aim to attract investments, stimulate economic growth, and create employment opportunities for Nigerians. Going forward, relevant stakeholders and regulators must collaborate closely in implementing these Directives efficiently and effectively. Through collective efforts, we expect that the full potential of Nigeria’s oil and gas sector will be further unlocked whilst significantly driving sustainable development and prosperity in Nigeria.