Incentives for Investing in Oil and Gas Sector


The following fiscal incentives have been approved by the Nigerian government in the gas production phase:

· Tax rate under petroleum profit tax (PPT) act to be at the same rate as company tax which is currently at 30%;
· Capital allowance at the rate of 20% per annum in the first 4 years, 19% in the 5th year and the remaining 1% in the books;
· Investment tax credit at the current rate of 5%;
· Royalty at the rate of 7% on shore and 5% offshore.

Gas Transmission and Distribution
· Capital allowance as in production phase;
· Tax rate as in production phase;
· Tax holiday under pioneer status.

LNG Projects
· Applicable tax rate under PPT is 45%;
· Capital allowance is 33% per annum onsite-straight-line basis in the first three years with 1% remaining in the books;
· Investment tax credit of 10%;
· Royalty of 7% on shore, 5% offshore tax deductible.

Gas Exploitation (Upstream Operations)
· All investments necessary to separate oil from gas from the reserves into suitable products is considered part of the oil field development;
· Capital investment facilities to deliver associated gas in usable form at utilisation or transfer points will be treated for fiscal purposes as part of the capital investment for oil development;
· Capital allowances, operating expenses and basis for assessment will be subjected to the provisions of the PPT act and the revised memorandum of understanding (MOU).

Gas Utilization (Downstream Operations)
Incentives for encouragement of exploitation and utilization of associated gas for commercial purpose include:
· An initial tax free period of three years renewable for an additional two years;
· 15% investment capital allowance which shall not reduce the value of the asset;
· All fiscal incentives under the gas utilisation down-stream operations in 1997 are to be extended to industrial projects that use gas in power plants, gas to liquid plants, fertiliser plants and gas distribution/transmission plants;
· The initial tax holiday is to extend from three to five years;
· Gas is transferred at 0% PPT and 0% royalty;
· Investment capital allowance is increased from 5% to 15%;
· Interest on loans for gas projects is to be tax deductible provided that prior approval was obtained from the federal ministry of finance before taking the loan;
· All dividends distributed during the tax holiday shall not be taxed.

Oil & Gas Free Zone
Incentives and fiscal measures approved by the government that favor and encourage large investment in the region include:
· No personal income tax;
· 100% repatriation of capital & profit;
· No foreign exchange regulation;
· No pre-shipment inspection for goods imported into the free zone;
· No expatriate quota;
· Initial tax holidays period has been extended from 3 to 5 years and renewable for another 2 years;
· Investment capital allowance has been increased from 5% to 15%;
· All dividends distributed during the tax holiday shall be tax-free, etc.

Connect With Us