May, 31 2025
Nigeria has just thrown down the gauntlet for its oil sector—the government wants companies to be leaner, more efficient, and plenty more profitable. President Bola Tinubu signed a new executive order called the Upstream Petroleum Operations Cost Efficiency Incentives Order, 2025 on May 30, 2025, and it’s got big implications for every player in the country’s oil game.
Here’s what’s fresh: for decades, oil companies complained about sky-high costs and never-ending red tape. Now, if a company slashes its expenses beyond what the Nigerian Upstream Petroleum Regulatory Commission expects, they’ll get real financial benefits. The incentives aren’t just vague promises. Businesses hitting—or beating—these strict annual cost targets can keep 50% of the extra revenue they help generate for the government. That’s a pretty strong reason to make those cost spreadsheets tighter than ever.
The new order doesn’t treat all oil operations alike, either. There are different benchmarks for onshore, shallow-water, and deepwater projects. This means the expectations, and the opportunities for bonuses, are tailored to how tough or easy it is to operate in those terrains.
This isn’t the first time Nigeria has tried to sweeten the pot. Just last year, the government introduced major changes to the oil industry’s tax scene: VAT on products like diesel and cooking gas got axed, and local compliance rules were brought in line with what’s considered normal globally. The old system locked out plenty of would-be investors, mostly thanks to drawn-out project timelines and cumbersome licensing steps that pushed up the final cost of doing business.
Now, with the new cost efficiency order, companies that really outperform can capture those benefits—without breaking the bank for public coffers. There’s a safety cap: tax credits can’t exceed 20% of a company’s total tax bill in a single year. The government still wants its share, but it’s creating a window for companies to invest, experiment, and grow.
Industry experts see this as more than a short-term fix. They argue Nigeria is finally trying to reclaim its faded energy crown, going from a land of slow-moving, high-cost deals to one where you can profit by running a tight ship. For international investors who skipped Nigeria in the past due to uncertain profit margins and rule changes, this move signals a new chapter. The hope is, with clearer rules and realistic rewards, capital will start flowing at a steadier, healthier pace.
At the center of all this? Operational accountability. The government isn’t just handing out tax breaks. Companies must prove that every naira saved is for real. The ultimate goal: make sure both Nigeria and the companies drilling its oil keep more value at home, rather than watching profits leak away through inefficiency or endless bureaucracy.
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