FG Zero-Rates VAT on Diesel, Cooking Gas

Diesel, Gas Now VAT-Free

“The VAT Modification Order 2024 introduces exemptions on a range of key energy products and infrastructure, including diesel...”

Nigeria's government rolls out tax reliefs to attract investments in oil and gas, strengthening energy security and economic competitiveness.

Nigeria's Federal Government has just announced exciting new tax incentives to boost investment in deep offshore oil and gas production. This move is expected to attract more investors to the sector and increase revenue for the government. According to Minister of Finance and Coordinating Minister of the Economy, Wale Edun, the government is introducing tax credits and allowances for Non-Associated Gas greenfield developments in onshore and shallow water locations.

Tax Incentives Breakdown

Non-Associated Gas (NAG) Greenfield Development Incentives: Tax credit incentives for NAG greenfield developments in the deep offshore and inland basin areas

Deep Water Oil and Gas Incentives: Incentives to ensure investments in deep water oil and gas projects achieve a competitive internal rate of return 

Royalty Rates: Reduced royalty rates for crude oil and condensates produced in the deep offshore (greater than 200 meter water depth) and Frontier and Inland Basin

VAT Exemptions

Additionally, key energy imports will no longer be subject to value-added tax (VAT), including:

• Diesel
• Feed gas
• Liquefied Petroleum Gas (LPG)
• Compressed Natural Gas (CNG)
• Electric vehicles 
• Liquefied Natural Gas (LNG)
• Infrastructure
• Clean cooking equipment

This is a significant move to encourage investment and growth in Nigeria's oil and gas sector. With these incentives, the government aims to increase revenue and improve the country's economic outlook.

Nigeria is making significant strides in the oil and gas sector, thanks to recent policy changes announced by Mohammed Manga, Director of Information and Public Relations. These measures aim to establish Nigeria's deep offshore basin as a premier global destination for oil and gas investments, enhancing energy security and accelerating the transition to cleaner energy sources. This move is expected to boost investments in the sector and position Nigeria as a leader in the global oil and gas market.

Key Policy Changes:

Tax Reliefs: New tax incentives for deep offshore oil and gas production to attract investments

VAT Exemptions: Diesel, feed gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), electric vehicles, Liquefied Natural Gas (LNG) infrastructure, and clean cooking equipment will no longer require value-added tax payment

Divestment Plans: ExxonMobil and Seplat's planned divestment, expected to receive ministerial approval soon, will further boost investments in the sector 

Investment Opportunities:

ExxonMobil's $10 billion investment in deep-water oil projects is expected to unlock 180,000 barrels per day (bpd). The company's focus on deep-water operations in the Niger Delta, particularly the Owowo project, is a significant step towards increasing Nigeria's oil production.

Government Support:

President Bola Tinubu's administration is committed to fostering sustainable growth in the energy sector, enhancing energy security, and driving economic prosperity for all Nigerians. These policy changes demonstrate the government's dedication to creating a favorable business environment and attracting investments to the sector.

The statement read, “In its avowed determination towards ensuring a boost in the nation's upstream and downstream sector, the Federal Government has introduced groundbreaking concessions aimed at revitalizing the industry.

“This is just as the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, today unveiled two major fiscal incentives aimed at revitalising Nigeria's oil and gas sector: Value Added Tax 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.”

Speaking further, Manga said, “The VAT Modification Order 2024 introduces exemptions on a range of key energy products and infrastructure, including diesel, feed gas, Liquefied Petroleum Gas, Compressed Natural Gas, electric vehicles, Liquefied Natural Gas 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.”

Nigeria is rolling out new tax incentives to boost investment in deep offshore oil and gas production, aiming to make its deep offshore basin a magnet for global oil and gas investments. This move is expected to attract more investors, increase revenue, and enhance energy security. The goal is to establish Nigeria as a leading destination for oil and gas investments, creating a favorable business environment and driving economic growth.

Key Objectives:

Increase Investment: Attract more investors to Nigeria's deep offshore oil and gas sector

Enhance Energy Security: Ensure a stable and reliable energy supply

Boost Revenue: Increase revenue for the government through increased oil and gas production

Recent Developments:

The Deep Offshore and Inland Basin Production Sharing Contract Act was amended and signed into law in November 2019, marking a new era for Nigeria's Production Sharing Contracts. This amendment introduced new incentives for investors, including tax reliefs and reduced royalty rates.

Benefits:

Job Creation: More investments will lead to job creation in the oil and gas sector

Economic Growth: Increased revenue will contribute to Nigeria's economic growth

Improved Infrastructure: Investments will lead to improved infrastructure development in the sector

With these incentives, Nigeria is set to emerge as a leading hub for oil and gas investments, fueling economic expansion.

The Ministry of Finance's new fiscal incentives demonstrate the administration's dedication to driving sustainable growth, energy security, and economic prosperity for all Nigerians. This move aims to revitalize the oil and gas sector, making Nigeria a more competitive destination for energy investments. By introducing tax reliefs and exemptions on key energy products and infrastructure, the government seeks to lower the cost of living, bolster energy security, and accelerate the transition to cleaner energy sources.

Key Objectives:

Foster Sustainable Growth: Encourage investments in the oil and gas sector

Enhance Energy Security: Ensure a stable and reliable energy supply

Advance Economic Prosperity: Drive economic growth and improve living standards for all Nigerians

These reforms are part of President Bola Tinubu's broader investment-driven policy initiatives, showcasing the administration's commitment to promoting sustainable growth and enhancing Nigeria's global competitiveness in oil and gas production.

“These reforms are part of a broader series of investment-driven policy initiatives championed by President Bola Tinubu, in line with Policy Directives 40- 42,” the statement added.

“They reflect the administration's strong commitment to fostering sustainable growth in the energy sector and enhancing Nigeria's global competitiveness in oil and gas production.”