President Bola Tinubu has ushered in a significant transformation for Nigeria's vital oil and gas sector with a landmark Executive Order, "Putting Every Barrel to Work: Nigeria’s New Presidential Directive on Cost Efficiency Targets New Investments, Improved Revenues and National Value." This directive, effective April 30, 2025, is a strategic response to the historically high operating costs within the nation's upstream petroleum operations, aiming to enhance competitiveness, boost government revenue, and attract much-needed investment.
At its core, the Order introduces far-reaching fiscal reforms that prioritize cost-efficiency and operational accountability. A key provision is the introduction of performance-based tax incentives for upstream operators who can demonstrate verifiable cost savings that align with defined industry benchmarks. To ensure these incentives don't unduly impact public funds, the Order intelligently caps tax credits at a maximum of 20 percent of a company’s annual tax liability. This balanced approach seeks to reward efficient operations without compromising government revenue streams.
The government acknowledges that elevated operating costs have stemmed from factors like prolonged project execution timelines and local content requirements. To address this, the directive mandates the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to annually publish specific cost benchmarks for various terrains – onshore, shallow water, and deep offshore. The NUPRC will also be tasked with setting annual Unit Operating Cost reduction targets for each terrain, taking into account their unique environmental and production characteristics. This systematic approach, informed by stakeholder consultation and transparent methodology, will allow for rigorous annual reviews of operators' performance against these targets within their tax return cycles.
President Tinubu's vision for this Order extends beyond mere cost cutting; it's about making Nigeria's oil and gas sector globally competitive and fiscally resilient. As the President articulated, the goal is to attract investment inflows because investors are convinced of real and enduring value, not out of charity. This directive, therefore, signals to the international community a commitment to building an efficient, competitive, and beneficial energy sector for all Nigerians, ultimately securing the nation's future and creating jobs.
To ensure seamless implementation, the Special Adviser to the President on Energy has been tasked with leading inter-agency coordination, guaranteeing that policy intent translates into measurable outcomes. As Mrs. Olu Verheijen, the Special Adviser, emphasized, this reform rewards efficiency, strengthens investor confidence, and promises greater value to the Nigerian populace. This new Order builds upon the administration's earlier 2024 reform directives, which already improved fiscal terms, streamlined project timelines, and aligned local content policies with global best practices. With this latest move, Nigeria is raising the bar, linking tax incentives to verifiable cost savings, establishing terrain-specific benchmarks, and safeguarding government revenue while incentivizing operational efficiency, all with the objective of putting every barrel to work for the nation's economy, for investors, and for Nigeria's energy security.
