President Bola Ahmed Tinubu last week signed an order called Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order 2026 to kick-start investment into Nigeria’s offshore oil field development.
According to the president, the order has the potential of unlocking up to $50 billion in deep offshore investment, beginning with the approximately $10 billion Bonga South West project.
The president said the order is important due to some offshore assets remaining idle, adding that the government could not keep waiting to leave resources that could be used to drive economic development in the bottom of the ocean while investments move to other competing countries.
To bring certainty and assurance to investors and developers that the country is ready to attract businesses in the deep offshore oil projects, the president said he is helping ‘existing deep offshore leases to reach Final Investment Decision by 31 December 2029 and qualify for the full standard incentive.’
What are the incentives?
The order stated that a Standard Production Tax Credit (Standard PTC) incentive will apply to project developments with existing leases, where the lessee makes a Final Investment Decision (FID) for the project development but unable to commit to the FID due to the occurrence or subsistence of a force majeure or future leases awarded after the effective date, and those derived from existing licences or future licences awarded after the effective date.
The order explained that subject to the provisions, developers or investors are eligible to a production tax credit for crude oil produced from a project development and it will be calculated from the commencement of production from that project development at the rate of $3.00 per barrel or at 20% of the fiscal oil price, depending on the incentive which is lower.
It however said this will be for a cumulative production of 150 million barrels that has a reserve that does not exceed 400 million barrels of crude oil equivalent.
For those whose reserve is over 400 million barrels, it adopted an incentive of $4.50 per barrel or at 20% of the fiscal oil price with a cumulative production of 500 million barrels.
It added that for those whose future leases are awarded after the effective date, there shall be an additional Standard PTC of $1.00 per barrel from the commencement of production up to cumulative production.
It went further to state that where the fiscal oil price applicable to the qualifying project development for a month is below $50 per barrel, the tax credit incentives for that month shall apply at 50% of the applicable rate.
For assets that are sold from a non-associated gas project development or project development containing crude oil and non-associated gas, the incentive will be $1.00 per thousand standard cubic feet (mscf) of gas sold or 30% of the fiscal gas price of such sale, whichever is lower.
New profit-sharing formula for non-associated gas production
The order also spelt out how profit-sharing contracts will be disbursed between the government and the developers, explaining that the minimum profit gas allocation to the Government under existing non-associated gas production will be 20% for project with reserves of 1 trillion cubic (TCF) but reserves with over 1 trillion will see the government getting 35%.
For projects with over 3 TCF and up to and including 5 TCF, the government will get 45% while over 5 TCF to 7 TCF will be 50%. But for projects over 7 TCF, the government will get the highest share of 60%.
The order also spelt out punishment for investors who lie to the government on the amount of reserves in their projects, and it gave the Nigerian Revenue Service the power to ‘withdraw the approval, recompute the tax payable, recover the amount of tax credit wrongly utilised or benefit wrongly obtained and impose applicable penalties and interest in accordance with the Nigeria Tax Administration Act, 2025 and any other applicable law.’
Experts call for caution
Experts who spoke with Daily Trust while praising the government for issuing the order to stimulate investment in the deep offshore oil projects, said the government needs to be cautious not to give way too much to investors and reduce the revenue benefits to the country.
They raised concerns on the profit-sharing formulas for non-associated gas projects as generosity.
Prof. Dayo Ayoade, an energy law expert at the University of Lagos, said the order is a bold move by the government and it recognizes how 19-year delay prior to signing the Petroleum Industry Act 2021 has allowed competing nations in Africa and elsewhere to reduce foreign direct investment inflows into Nigeria’s oil and gas industry.
He added that the objective is to now drive investment into deep offshore developments for those parties eligible using production sharing contracts to unlock up to $50 billion in new investment within the next 15 months.
However, he said the country should not repeat the mistake of the 1990s where Nigeria gave very generous production sharing contract terms, but were poorly managed.
‘Nigeria suffered heavy commercial losses where we failed to renegotiate the terms of the contract as the contract had allowed us. We seem to be heading again, if we’re not careful with this.
‘Now, I’ll give you an example. If you look at paragraph 4a of the incentives order talking about profit gas sharing formula, it states that the federal government’s concessionaire NNPCL will get 20% from an up to 1 trillion cubic feet of gas. This means that the Nigerian government will not even share equally with the foreign contractor until they find over 5 trillion cubic feet of gas to 7 trillion cubic feet of gas.
‘These are very unusual fields or non-associated gas fields. And Nigeria will now only become a majority 60% when we go over that 7 trillion cubic feet threshold. These are unusually generous. I believe the government is struggling to, as I said, use it or lose it. But we are the ones who put ourselves in this poor negotiating position. And I hope we don’t suffer for the consequences because in future, when Nigerians see that we’re not benefiting so much, the pressure will now be on to go back to the IOCs and say, no, we want to renegotiate and that could become problematic for us,’ he added.
On his part, Emeritus Professor of Petroleum Economics, Prof. Omowumi Iledare, said the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order 2026 should be assessed not as inherently positive or negative, but through a single governing question: does it maximise Nigeria’s net economic value from its petroleum resources?
He explained that the projects are capital-intensive, high-risk, and technologically complex, as such, many remain un-sanctioned because post-tax returns are insufficient to justify investment.
‘Government estimates suggest the incentive could unlock up to $50 billion in deepwater investment and revive stalled projects. However, investment attraction is not a policy objective in itself.
‘The correct fiscal test is not how much investment is induced, but how much incremental national value is created relative to revenue foregone. Nigeria’s core challenge is therefore not resource scarcity, but value realisation efficiency-how effectively petroleum resources are converted into sustainable fiscal and developmental outcomes,’ he stated.
He added that the incentive should thus be treated strictly as an investment-enabling instrument, not a permanent transfer of petroleum rent.