In a decisive step to revitalize Nigeria’s oil and gas industry, President Bola Ahmed Tinubu has signed a landmark Executive Order designed to reduce production costs and introduce performance-based tax incentives for upstream operators.
Announced Saturday by the President’s Special Adviser on Energy, Olu Verheijen, the initiative underscores the administration’s commitment to repositioning the sector for sustained investment and enhanced global competitiveness.
The Executive Order, named The Upstream Petroleum Operations Cost Efficiency Incentives Order (2025), establishes a framework that rewards cost-saving measures by oil companies while protecting national revenue streams.
Under the new policy, 50 percent of the government’s incremental revenue gains from cost reductions will be shared with the operators. Additionally, tax credits linked to operational efficiency are capped at 20 percent of a company’s annual tax liability. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will issue annual benchmarks by terrain, onshore, shallow water, and deep offshore, to guide the incentive allocation.
“This is a deliberate strategy to position Nigeria’s upstream sector as globally competitive and fiscally resilient,” Verheijen said. He emphasized that the policy aims not just to cut costs but to reward efficiency and restore investor confidence.
Rising Investments Signal Renewed Investor Confidence
The announcement follows a surge of over $8 billion in investments in Nigeria’s deepwater oil and gas projects over the past year, attributed to reforms under President Tinubu’s leadership. Key projects, including Shell’s Bonga North and TotalEnergies’ Ubeta, have advanced after making Final Investment Decisions, reflecting renewed optimism among investors.
Nigeria’s oil production costs, among the highest worldwide, range from $25 to $48 per barrel depending on terrain and security factors, significantly higher than low-cost producers like Saudi Arabia, where costs are between $3 and $10 per barrel. Experts cite bureaucratic hurdles, regulatory uncertainties, and costly local content requirements as drivers of these elevated expenses.
In response, Tinubu’s government has rolled out multiple policy reforms, including the Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order, 2024 and directives to streamline petroleum contracting processes. The latest Executive Order aims to institutionalize fiscal discipline, cut inefficiencies, and maximize economic returns from the sector.
“This Order is a signal to the world,” President Tinubu declared. “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.”
To ensure effective implementation, Verheijen will lead an inter-agency team charged with translating the Order’s policies into concrete results. The administration’s goal is to close the cost gap with peer producers and attract sustained capital inflows to a sector long plagued by inefficiencies.
