President Tinubu’s New Policy Directives To Reform The Oil & Gas Sector

Following extensive engagements, analysis and benchmarking, with industry operators and regulators, President Tinubu during the week announced new policy directives via Executive Orders that will further open up and transform the oil and gas sector. The ambition of the President is to make Nigeria the preferred destination for investments in the sector.

Special Adviser to the President on Energy, Olu Verheijen addressed the Ministerial Press Briefing in Abuja on Friday where she gave further details on the new reforms.

The three Policy Directives introduce fiscal incentives, reduce contracting and project timelines, and promote cost efficiency for Oil & Gas projects. These Policy Directives will be the forerunner to legislative amendment that will follow.
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The Policy Directives are:

A. Fiscal Incentives for Non-Associated Gas (NAG), Midstream and Deepwater Oil & Gas Developments:

This Directive aims to facilitate the monetization of Nigeria’s extensive oil and gas resources. For Gas, 76% of our gas reserves, remain undeveloped. This explains why, despite possessing one of the largest gas reserves globally, we lack sufficient gas to meet our domestic needs for industry, for power and for cooking. The fiscal incentives introduced will attract the much-needed investments to enhance energy security, catalyze economic activity, attract essential foreign exchange, and promote job creation.

B. Streamlining of Contracting Processes, Procedures and Timelines:

The President issued the directive to reduce contracting timelines and project delivery. Benchmarking and analysis revealed that the contracting cycle takes up to 36 months. This Directive will compress this cycle to less than 6 month in line with global averages. This will expedite the delivery of oil and gas projects.

C. Local Content Practice Reform:

This Directive will ensure local content requirements are implemented in a manner that does not impede investments or the cost competitiveness of oil and gas projects. This Directive aims to reduce the cost premium of operating in Nigeria, presently averaging at 40%. The FG anticipates significant benefits from this reform, including the development of local companies’ capacity, thereby generating additional business opportunities.

The three Executive Orders identified implementing partners that will deliver on immediate execution.

1.Fiscal Incentives:

The Minister of Finance/Co-ordinating Minister of the Economy will develop and propose amendments to introduce fiscal incentives for deep-water developments into legislation. The Federal Inland Revenue Service (FIRS) and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will issue guidelines on the implementation of the fiscal incentives.

2.Streamlining of Contracting Processes, Procedures and Timelines:

The Ministry of Finance Incorporated, Ministry of Petroleum Incorporated, Nigerian Content Monitoring and Development Board, NNPCL will be responsible for implementation and enforcement.

3.Local Content Practice Reform:

The NCDMB is responsible for implementing the Directive and issuing supporting guidelines.

Details on the role of each stakeholder are contained in the Policy Directives, which have been Gazetted and will be published on the website of relevant government agencies.

President Tinubu strongly believes that private sector-led growth enabled by clear and inclusive government policies is the most enduring path to prosperity for all Nigerians. The President is committed to sustained engagement and collaboration with key investors to ensure Nigeria improves on the ease of doing business.