Nigeria Tax Act 2025 consolidates oil and gas taxes, curbs revenue leakages, and boosts investor confidence in the petroleum sector

The Nigeria Tax Act 2025, which took effect on 1 January, is expected to strengthen revenue collection in the country’s oil and gas sector while streamlining regulatory oversight, according to energy development economist Ken Ife.

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Speaking to journalists on Sunday in Lagos, Mr Ife described the Act as one of the most significant fiscal reforms in Nigeria’s petroleum industry in decades.

The law consolidates legacy statutes, including the Petroleum Profits Tax Act (PPTA), and fully integrates the Petroleum Industry Act 2021 into a single, unified tax code.

“The new framework replaces a fragmented regime with a streamlined fiscal system designed to enhance transparency, efficiency, and investor confidence,” Mr Ife said.

He noted that upstream companies will continue to face a split tax structure: Hydrocarbon Tax (HT) on profits from crude oil production and Companies Income Tax (CIT) on general corporate profits.

The hydrocarbon tax ranges from 15 to 30 per cent, while the standard CIT for large companies is set at 30 per cent, with a planned reduction to 25 per cent in coming years.

The introduction of a 15 per cent Minimum Effective Tax Rate (ETR) was highlighted as a major change for international and indigenous oil firms.

“This ensures a minimum tax contribution from multinational groups and aligns Nigeria with the OECD’s Pillar Two framework,” Mr Ife explained.

The Act also consolidates several smaller levies into a single 4 per cent Development Levy on assessable profits, excluding those under the Hydrocarbon Tax, providing relief for upstream operations.

A five per cent surcharge has been introduced on fossil fuels at the point of sale, while clean energy products such as Compressed Natural Gas, Liquefied Petroleum Gas, and household kerosene remain exempt.

To address production costs, the Act introduces the Upstream Petroleum Operations (Cost Efficiency Incentives) Order 2025.

Companies reducing operating costs below regulatory benchmarks may retain up to 50 per cent of the savings via tax credits.

The law also includes Gas Tax Credits and Gas Tax Allowances for greenfield non-associated gas developments, reinforcing Nigeria’s gas strategy.

Mr Ife added that the newly established Nigeria Revenue Service now holds exclusive authority to collect all petroleum-related taxes and royalties.

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“This simplifies company interfaces, reduces revenue leakages, and allows regulatory agencies to focus solely on monitoring, enforcement, and performance,” he said.