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EXPLAINER: What Tinubu’s new deep offshore tax incentives mean for Nigeria
President Bola Tinubu announced on Tuesday that he approved the Deep Offshore Oil and Gas Tax Credit Order, 2026—a new fiscal incentive designed to attract large-scale investments into Nigeria’s deep offshore oil and gas sector.
The Nigerian leader hinted that the policy is aimed at making previously stalled offshore projects commercially viable by offering investors tax incentives and greater certainty over the fiscal terms governing their investments.
“I have signed the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026, creating a clear and predictable framework capable of unlocking up to $50 billion in deep offshore investment, beginning with the approximately $10 billion Bonga South West project,” the president wrote.
He explained that for too long, some of Nigeria’s biggest offshore opportunities have remained stalled, and that “We cannot afford to leave that opportunity beneath our waters for another decade.”
The president explained that as capital moves, countries compete for the resources, and investors committing billions of dollars over many years need certainty.
“We are providing that certainty, with a clear window for existing deep offshore leases to reach Final Investment Decision by 31 December 2029 and qualify for the full standard incentive,” he said.
The order marks the tenth major policy directive of the Tinubu-led administration targeted specifically at the oil and gas sector. It clearly demonstrates the deliberate efforts being made by the government to remove constraints holding back investment, production and value creation in the country’s oil and gas industry.
But beyond attracting capital, the federal government says it wants the new investments to generate jobs, strengthen Nigerian businesses and build local technical capacity.
“Our natural resources must work harder for our people. Nigeria First,” the president wrote on his official Facebook page on Wednesday.
Why did the government introduce the new incentive?
The deep offshore framework announced on Tuesday came seven months after Shell Plc signalled moves to renew and expand investment push in Nigeria, citing improved political stability, policy consistency, and leadership as key factors driving its confidence in the country’s energy sector.
During a courtesy visit to President Tinubu early this year, the Chief Executive Officer of Shell Plc, Wael Sawan, disclosed the company’s investment plans and explained that Nigeria now stands out as one of the most attractive destinations for capital allocation within Shell’s global portfolio.
“We think there is more to invest here, and we understand the vision that you (President Bola Tinubu) have for the country, and so we are indeed working on a project, Bonga Southwest, that could potentially, if we get to an FID stage, see us, with the partners, invest around $20 billion in foreign direct investment,” Mr Sawan said at the time.
The policy was also announced less than a month after 31 companies emerged winners of 37 oil and gas blocks in Nigeria’s 2025 Licensing Round following the conclusion of the commercial bid conference held in Abuja last month.
Nigeria has significant oil and gas resources located in deep offshore fields, but several large projects have remained undeveloped for years. Similarly, oil and gas exploration activities across Nigeria’s major oil fields have generated significant environmental and economic impacts over the past decades. Shell’s activities across the Niger Delta have resulted in a plethora of environmental issues including several lawsuits. Pipeline vandalism, insecurity and vague regulations/policies have also prevented investors from investing in Nigeria’s deep and shallow reserves at a larger scale.
On Tuesday, the government says high development costs, complex project economics and uncertainty over fiscal terms have discouraged investors from committing the billions of dollars required to develop these fields.
Deep offshore projects are particularly capital-intensive because they require specialised vessels, drilling equipment, subsea infrastructure and advanced technology.
At the same time, oil companies have several investment options around the world and generally commit capital to projects where the fiscal and regulatory environment provides sufficient certainty over the long term.
The new framework is therefore intended to make Nigeria’s deep offshore projects more competitive and give investors clearer terms for making long-term investment decisions.
How much investment is Nigeria targeting and what is the tax incentive?
The federal government estimates that the new framework could unlock up to $50 billion in fresh deep offshore investments.
One of the major projects expected to benefit is the Bonga Southwest-Aparo development, which has an estimated investment requirement of about $10 billion.
The government expects the policy to help move such projects from prolonged delays to final investment decisions, construction and eventual production.
Projects that commence investment within the qualifying period, up to 31 December 2029, are expected to benefit from the incentives provided under the framework.
A review of the 13-page order document by the government indicated that the Nigerian government is offering investors a more favourable and clearer tax treatment to improve the economics of qualifying deep offshore projects.
The idea is to reduce the tax burden associated with developing these capital-intensive fields, thereby improving their expected returns and making them more attractive to investors.
For companies considering whether to commit billions of dollars to a project that could take years to develop and operate for decades, the certainty provided by a clearly defined fiscal framework can be as important as the size of the incentive itself.
The newly signed order has provided a distinctive framework for the government and prospective/eligible investors to operate in an atmosphere that is fair and beneficial to both parties.
What does Nigeria get in return?
The government says the policy is not simply about attracting foreign capital.
President Tinubu has emphasised that the new investments should also translate into tangible benefits for Nigerians.
The approved projects are expected to create employment for indigenous engineers, welders, technicians, marine workers and other professionals. Likewise, it is projected that local companies could benefit from opportunities in fabrication, marine services, logistics, engineering and other areas of the offshore supply chain.
Additionally, the Nigerian government wants more fabrication, equipment supply, technical services and training to take place locally rather than being outsourced entirely overseas.The projects are expected to provide opportunities for Nigerian workers to acquire specialised skills needed in the offshore oil and gas industry.
Authorities envisaged that increased demand from major offshore projects could help Nigerian businesses expand their capacity and participate in more sophisticated areas of the energy value chain.
Will the government policy translate into real impact for Nigerians?
One of the fundamental questions surrounding the government’s recent policy is: How will the government policy benefit an average Nigerian? Similarly, will the government lose money by granting tax incentives to IOCs?
Tax incentives mean the government may forgo some tax revenue that it would otherwise have collected from qualifying projects. The government’s argument is that without the incentives, some of these projects may not be developed at all.
It is believed that if the incentives succeed in attracting new investment, the government could eventually benefit through increased oil production, royalties, taxes from other parts of the economy, employment and wider economic activity.
The ultimate test, therefore, will be whether the economic benefits generated by the new investments outweigh the revenue forgone through the incentives.
Also, will the dividends of the investment reach grassroot communities? This is especially because decades of oil exploration in Nigeria’s oil-rich communities have robbed them of their livelihood due to persistent pollution from oil and gas fields.
What should Nigerians watch out for?
For many Nigerians, the success of the new policy may not be judged solely by the amount of investment announced but by the direct impact on Nigerians.
Key indicators will include, how environmentally friendly or sustainable are the activities of the approved project, how much of the projected $50 billion is actually committed, how many stalled projects move to Final Investment Decision, how much additional crude oil and gas the projects eventually produce, and how many Nigerian workers are employed.
Other critical concerns are how much project expenditure goes to Nigerian companies, how much equipment and infrastructure is produced or assembled in Nigeria. And whether Nigerian workers and companies are able to acquire capabilities that remain after the projects are completed.
READ ALSO: High taxation, insecurity, high interest rates top constraints facing Nigerian businesses – Survey
These concerns are critical, especially because groups of environmentalists across Nigeria are already criticizing the government move to resume exploration in the Niger Delta.
This is because the devastation caused by oil companies across the region has caused unprecedented levels of hardship, suffering and bitter memories for many families and communities. Remediation efforts and compensation oftentimes do not complement the damages caused.
Prospects
The new deep offshore incentive framework is essentially an attempt to solve two problems at once.
Nigeria’s bold move to unlock billions of dollars in investment that has remained on the sidelines because of the difficult economics and uncertainty surrounding some deep offshore developments has attracted global attention.
While the government wants to ensure that the resulting investments generate broader economic benefits for Nigerians, rather than simply increasing crude oil exports, a deliberate effort to scale up environmental protection regulations would boost confidence in Nigeria’s ambitious climate change targets as enshrined in its third series of Nationally Determined Contribution (NDC-3.0) submitted to the United Nations Framework Convention on Climate Change.
Nonetheless, if the new deep offshore policy delivers as intended, Nigeria could see new offshore projects, increased oil production, more employment, stronger local businesses and greater technical capacity.
But the real measure of success will be what happens after the announcements: how much money is actually invested, how many projects are developed, how much oil is produced, how sustainable are the projects and how much of the resulting economic value remains in Nigeria.
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Nigerian stocks slid by 1.6 per cent last week, following profit-taking activities across all sectors except oil & gas.
The Insurance Index was worst hit, declining by 5.5 per cent, and remains the only sector index so far this year with a negative yield.
“Stocks with strong earnings, attractive valuations and consistent dividend payouts should also remain in focus,” investment bank United Capital Plc said in a note to investors ahead of the week.
This week, focus will shift to the primary market, where the landmark $1.6 billion initial public offering of Dangote Refinery will be commencing.
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The Centre for the Promotion of Private Enterprise (CPPE) has cautioned against restoring the petrol subsidy, describing the policy as fiscally unsustainable despite the severe economic pressures caused by rising petrol prices.
The private-sector advocacy group, in a policy brief signed by its Chief Executive Officer, Muda Yusuf, on Sunday, said the recent escalation in petrol prices had increased transportation, logistics and production costs, weakening consumers’ purchasing power.
It added that the recent increase in fuel prices also worsened the competitiveness challenges confronting businesses, particularly micro, small and medium enterprises (MSMEs).
CPPE’s position comes amid renewed calls for a return to fuel subsidy, including a pledge by former Vice-President Atiku Abubakar to restore a targeted petrol subsidy if elected in 2027.
The organisation said the subsidy debate should not be reduced to the issue of pump prices, arguing that it has wider implications for Nigeria’s fiscal sustainability, foreign exchange stability, investment, domestic refining, industrialisation, employment and energy security.
“The central policy question is therefore not whether Nigeria should return to the old subsidy regime, but how to preserve the gains of the reform while reducing its social costs and translating the resulting fiscal space into tangible improvements in citizens’ welfare,” CPPE said.
Subsidy regime
According to the think tank, Nigeria previously spent an estimated $10 billion to $15 billion annually on petroleum-product imports before the subsidy reform.
It said subsidy and under-recovery obligations also consumed significant public resources, constrained remittances to the Federation Account and intensified fiscal pressures.
CPPE said artificially low domestic petrol prices also encouraged arbitrage and cross-border diversion, effectively resulting in Nigerian public resources subsidising fuel consumption outside the country.
“The old regime was therefore not merely a subsidy problem; it was a major fiscal, foreign-exchange and resource-allocation problem,” the think tank said.
Domestic refining
The group said the shift to market-based petrol pricing had improved the commercial viability of domestic refining by creating stronger investment incentives in the sector.
The think tank argued that a competitive domestic refining industry would generate opportunities beyond petrol production, including in diesel, aviation fuel, petrochemicals, fertiliser, plastics, chemicals, logistics, storage and maritime services.
“Domestic refining also conserves foreign exchange through import substitution, creates export opportunities and retains refining, engineering, logistics and technical jobs within the Nigerian economy,” CPPE said.
It urged Nigeria to pursue the transition from dependence on imported petroleum products to becoming “a competitive regional refining and petrochemical hub.”
CPPE acknowledged that subsidy removal had increased revenues available to the federal, state and local governments but said higher government revenues alone could not justify the reform.
“Citizens must see tangible benefits through improved public transportation, electricity, healthcare, education, food security, infrastructure and social protection,” it said.
The organisation said the debate should now focus increasingly on fiscal accountability and the quality of government spending.
It called on the three tiers of government to transparently demonstrate how the additional resources arising from the reform were being used to improve economic and social outcomes.
Global oil shock
The group also stressed the need to distinguish the price increase associated with subsidy removal from more recent increases attributed to movements in global crude oil and refined-product prices.
According to CPPE, petrol was selling at about N774 to N800 per litre before the latest escalation in international energy prices, while prices subsequently rose above N1,300 per litre amid what it described as a sharp increase in global energy prices linked to the Middle East crisis.
“It would therefore be incorrect to attribute the entirety of the latest petrol-price increase to subsidy removal,” the organisation said.
The think tank described the two developments as separate issues requiring different policy responses: the first, a domestic structural reform involving the transition to market-based pricing, and the second, an external commodity price shock.
N20 trillion subsidy bill
CPPE said restoring a universal petrol subsidy could recreate the fiscal and foreign-exchange pressures that prompted the reform.
Using an estimated petrol consumption benchmark of 50 million litres per day and an indicative subsidy requirement of N1,050 per litre, the organisation estimated that the potential subsidy exposure could amount to about ₦ 152.5 billion daily, N1.575 trillion monthly, and approximately N19.16 trillion annually.
It described the figure as an annual burden of about N20 trillion, while acknowledging that the actual cost would depend on factors including consumption, crude oil prices, exchange rates, refining or landing costs, and the regulated pump price.
CPPE also warned that consumption could increase under a subsidy regime as price differentials could recreate incentives for cross-border diversion.
“An annual subsidy bill approaching N20 trillion would impose an enormous opportunity cost,” it said.
According to the organisation, such spending could compete with funding for infrastructure, education, healthcare, security, agriculture and social protection, while potentially widening the fiscal deficit and increasing borrowing and debt-service pressures.
It further warned that increased government borrowing could crowd out private-sector credit, sustain high interest rates and weaken investment, productivity, job creation and economic growth.
“Nigeria would therefore risk replacing an energy-price problem with a much larger fiscal, debt, foreign-exchange and investment problem,” CPPE said.
Targeted relief
Rather than restoring the the petrol subsidy, the organisation urged the government to implement targeted interventions to reduce household vulnerability and business costs.
It recommended expanding affordable public transportation, rail freight, and logistics infrastructure; improving electricity supply; accelerating compressed natural gas (CNG), solar, and distributed energy solutions; and strengthening food production through improved agricultural security, irrigation, rural infrastructure, and logistics.
CPPE also called for targeted support for vulnerable households, improved public healthcare and education, and measures to reduce energy, logistics and financing costs for productive enterprises, particularly MSMEs.
READ ALSO: CPPE urges NMDPRA to tie petrol imports to verified supply gaps
It urged the government to maintain a predictable, market-oriented framework for the downstream petroleum sector to protect investor confidence and encourage further investment in domestic refining.
“The appropriate policy direction is to preserve the downstream petroleum reforms while aggressively mitigating their social and economic costs,” the organisation said.
CPPE said the fiscal gains from subsidy removal must become more visible through infrastructure, public services and productive investment, alongside greater transparency and accountability in the utilisation of additional revenues accruing to the federal, state and local governments.
“The subsidy debate should therefore move beyond the binary question of whether petrol subsidy should be restored.
“The more consequential issue is how Nigeria can convert the gains of the reform into lower structural costs, stronger domestic production, improved competitiveness, greater energy security and measurable improvements in citizens’ welfare,” it said.
The organisation said the recommendations would make the reform “economically sustainable and socially defensible.”
Nigeria’s petrol subsidy was removed in May 2023 after President Bola Tinubu announced during his inauguration on 29 May that “the fuel subsidy is gone.”
The announcement effectively ended the government’s previous system of subsidising petrol costs, prompting the Nigerian National Petroleum Company Limited (NNPC Ltd) to adjust pump prices nationwide in June 2023.
The reform was intended to reduce the government’s financial burden from subsidising petrol.
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