In a bold move to strengthen investor confidence and reduce high operational cost in Nigeria’s oil and gas industry, President Bola Tinubu has signed a fresh executive order titled the Upstream Petroleum Operations Cost Efficiency Incentives Order 2025. The policy introduces performance-based tax incentives aimed at encouraging upstream operators to deliver measurable cost savings, ultimately boosting project competitiveness and national revenue.
This development is part of the Federal Government’s ongoing reforms under the Decade of Gas initiative, marking a pivotal moment in Nigeria’s journey towards a more investment-friendly and efficient petroleum sector.
Clear Incentives to Cut Costs
Under the new order, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will annually set cost benchmarks across terrain types onshore, shallow water, and deep offshore. Operators that meet or surpass these benchmarks will receive up to 50% of the incremental government gain generated from their cost savings.
In addition, eligible companies can access tax credits capped at 20% of their annual tax liability, ensuring that government revenue is safeguarded while providing compelling incentives to efficient operators.
According to the Presidency, this approach aligns with global best practices and underscores Nigeria’s commitment to becoming a competitive investment destination.
Coordinated Implementation and Accountability
To ensure effective execution, the President has appointed the Special Adviser on Energy to lead inter-agency coordination. This will guarantee that policy objectives translate into measurable outcomes, while fostering alignment across institutions like the NUPRC and the Nigerian National Petroleum Company Limited (NNPCL).
Speaking on the development, energy expert Cecili Eyebe, Director at ASCAP Management, described the order as “a game-changer” that addresses a core issue in Nigeria’s oil economy high production costs.
“This executive order signals serious intent. It’s about cost discipline. Nigeria’s average production cost has hovered around $25 per barrel one of the highest globally. In contrast, countries like Angola average under $15, and Saudi Arabia is as low as $5,” Eyebe stated.
Industry Response and Investment Momentum
The move builds on earlier executive orders introduced between late 2023 and early 2024. These included offshore tax incentives and fast-tracked contract approvals, which reportedly led to over $8 billion in committed investments, including:
- Shell’s $5 billion pledge for the Bonga North project,
- TotalEnergies’ $1 billion commitment, and
- Multiple IOC divestments to local firms worth over $4 billion.
These commitments, experts say, were catalysed by improved fiscal terms and a more proactive investment climate.
Challenges Ahead: Bureaucracy, Security, and Infrastructure
However, concerns remain. While fiscal incentives are welcome, analysts argue that deeper structural issues must be addressed to fully unlock the benefits. These include:
- Persistent oil theft (though reportedly down to 5,000 barrels per day from 130,000),
- Ageing infrastructure,
- Prolonged contract approvals, and
- A local content policy that sometimes raises costs by mandating domestic contractors over more affordable international alternatives.
“Executive orders can’t work in isolation. We must dismantle the bureaucratic bottlenecks that delay investment decisions. It’s not just about setting cost target it’s about making those targets achievable,” Eyebe added.
Refinery Reform and NNPCL Oversight
There’s also growing public frustration over Nigeria’s underperforming refineries. Billions spent on refurbishments have yet to yield consistent output. Many experts, including Eyebe, recommend privatisation as a practical solution arguing that private sector involvement would bring efficiency and reduce financial waste.
Additionally, Eyebe urged the newly inaugurated NNPCL board to prioritise:
- A full audit of national oil assets,
- Fast-tracking NNPCL’s transformation into a fully commercial entity, and
- Consolidating Nigeria’s upstream capacity to improve output and revenue.
The Bigger Picture
Nigeria’s executive orders are part of a broader strategy to reposition its oil and gas sector amid rising global competition. While the Petroleum Industry Act (PIA) provided a legislative foundation, it did not fully address Nigeria’s competitiveness in a region where investors have choices.
This latest directive, therefore, serves as a signal both to domestic stakeholders and the international market that Nigeria is serious about becoming a cost-efficient, investment-friendly oil and gas hub.
Yet, as stakeholders warn, the success of this order will depend on implementation, institutional accountability, and continuous policy coherence.
Final Thoughts
While the executive order provides a promising framework for cost reduction and investment attraction, it must be accompanied by a transparent regulatory environment, improved security, and effective communication. Only then can Nigeria truly capitalise on its vast natural resources and translate policy into prosperity.