President Bola Tinubu has signed an Executive Order designed to reduce costs in oil and gas projects, enhance government revenue, and speed up investment inflows into Nigeria’s energy sector.

According to a statement released Thursday by the Office of the Special Adviser to the President on Energy, the order implements comprehensive fiscal reforms that emphasize cost-efficiency, operational accountability, and maximizing national value.

Titled “Putting Every Barrel to Work: Nigeria’s New Presidential Directive on Cost Efficiency Targets New Investments, Improved Revenues and National Value,” the order sets a bold agenda to control production costs while providing globally competitive terms to attract serious investors.

The statement highlights a key provision that caps tax credits at a maximum of 20 per cent of a company’s annual tax liability.

The government explained that this measure aims to safeguard public revenues while continuing to reward efficiency and responsible operations in the upstream sector. The Order will take effect on April 30, 2025.

The Upstream Petroleum Operations Cost Efficiency Incentives Order (2025) also introduces performance-based tax incentives for upstream operators who achieve verifiable cost savings that meet established industry benchmarks.

A copy of the official gazette read, “The operating costs in the Nigerian oil and gas sector have been observed to be high compared to the global average, arising mainly from prolonged project execution timelines and local content requirements. The President has, in response to the high operating costs, issued policy directives on the reduction of oil and gas sector operating costs, contracting timelines and local content compliance requirements.

“The Federal Government of Nigeria is committed to efficient management of petroleum resources and reduction of petroleum cost in the upstream petroleum sector to enhance competitiveness and efficiency; and it has become necessary to provide additional measures to promote fiscal discipline, reduce operating cost and maximise Nigeria’s economic gains from the upstream petroleum operations through monitoring mechanisms and appropriate regime of incentives.”

The Order also directs the Nigerian Upstream Petroleum Regulatory Commission to publish annual benchmarks based on terrain categories: onshore, shallow water, and deep offshore.

The Commission will annually conduct an assessment and benchmarking study to set appropriate cost benchmarks for upstream operations and Unit Operating Costs across onshore, shallow water, and deep offshore terrains. These benchmarks will be determined following guidelines issued under the Petroleum Industry Act. Before issuing these guidelines, the Commission will consult relevant stakeholders and publish the methodology used for the annual benchmarking.

“With the objective of reducing the overall cost profile of petroleum operations, annually assign specific Unit Operating Cost reduction targets for each terrain, taking into consideration the peculiarities of their operating environment and production volume; and conduct annual reviews within the tax return cycle of the lessee’s or licensee’s performance with the key assessment metric being the Unit operating Costs to determine adherence to set targets,” it stated.

Furthermore, detailed implementation guidelines for the new Order will be issued in due course. Among its key provisions, the Order caps tax credits at 20 percent of a company’s annual tax liability, safeguarding government revenues while providing attractive fiscal terms to encourage efficient operators.

“Nigeria must attract investment inflows, not out of charity, but because investors are convinced of real and enduring value. This Order is a signal to the world: we are building an oil and gas sector that is efficient, competitive, and works for all Nigerians. It is about securing our future, creating jobs, and making every barrel count,” said President Tinubu.