A prominent oil and gas expert, Ken Ife, has stated that the newly implemented Nigeria Tax Act 2025 will significantly reduce revenue leakages in the country’s oil and gas sector. The expert explained that the tax reforms would streamline the fiscal framework, promote greater transparency, and build investor confidence in the industry.

The Nigeria Tax Act 2025, which came into effect on January 1, 2026, represents one of the most comprehensive fiscal reforms in Nigeria’s petroleum sector in recent decades. Signed into law in June 2025, the new act consolidates earlier statutes, including the Petroleum Profits Tax Act (PPTA) and integrates the Petroleum Industry Act (PIA) 2021 into a unified tax code.

A Unified Tax Framework for the Industry

Mr. Ife noted that the new tax code effectively replaces the fragmented tax regime with a more efficient and transparent framework, which is expected to improve investor confidence and the overall performance of the sector. He explained that the upstream sector will continue to face a split tax structure comprising the Hydrocarbon Tax (HT) on crude oil production profits and the Companies Income Tax (CIT) on general corporate profits.

• The Hydrocarbon Tax (HT) remains between 15 and 30 percent, depending on the type of license held by the company.
• Companies Income Tax (CIT) for large companies is set at 30 percent, with plans to reduce it to 25 percent in the coming years.

According to Ife, the planned reduction in the CIT rate to 25 percent will be encouraging to investors, improving retained earnings for operators and potentially boosting sector investment.

The Introduction of Minimum Effective Tax Rate

One of the most significant changes introduced by the new tax laws is the 15 percent Minimum Effective Tax Rate (ETR) for International Oil Companies (IOCs) and large indigenous firms. This aligns Nigeria’s tax system with the OECD’s ‘Pillar Two’ framework, where multinational companies are required to pay a top-up tax if their effective tax rate falls below 15 percent due to tax incentives or deductions.

“This 15 percent ETR is critical in ensuring that multinational companies contribute fairly to Nigeria’s economy,” Mr. Ife said, emphasizing its role in plugging revenue leakages and guaranteeing a minimum contribution from large firms.

A Consolidated Development Levy

The tax reform also introduces a 4 percent Development Levy on profits subject to CIT, consolidating several smaller levies, including those for the Tertiary Education Tax, NITDA Levy, NASENI Levy, and the Police Trust Fund Levy. This is expected to simplify compliance and streamline the tax process, offering some relief to upstream operators by applying only to CIT profits, rather than Hydrocarbon Tax profits.

Energy Transition Measures and Surcharges

The new tax regime also reflects global energy transition trends, with a 5 percent surcharge introduced on fossil fuel products like petrol and diesel at the point of sale. However, clean energy products, such as Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG), are exempt from this surcharge. The policy is expected to face some resistance, particularly in terms of its implementation at the pump.

While the surcharge could lead to higher fuel prices, Mr. Ife pointed out that it would serve as part of the government’s commitment to reducing carbon emissions and driving the energy transition.

Cost Efficiency Incentives and Gas Strategy

Addressing high production costs, the tax reform introduces the Upstream Petroleum Operations (Cost Efficiency Incentives) Order 2025, which allows companies that reduce operating costs below regulatory benchmarks to claim tax credits, retaining up to 50 percent of the cost savings.

Additionally, the new tax code reinforces Nigeria’s gas strategy by introducing Gas Tax Credits (GTC) and Gas Tax Allowances (GTA) for greenfield non-associated gas developments. This supports the country’s goal of positioning gas as a key transition fuel for the future.

Simplified Revenue Collection System

The new tax system also creates the Nigeria Revenue Service (NRS), which will now have exclusive responsibility for collecting all petroleum-related taxes and royalties. This consolidation simplifies the tax interface for companies, which previously had to deal with multiple regulatory agencies. It is expected to reduce revenue leakages and enable regulatory bodies to focus more on monitoring, enforcement, and performance assessments.

Conclusion

The Nigeria Tax Act 2025 is expected to transform the country’s oil and gas sector, curbing revenue leakages, increasing tax compliance, and attracting more investment. The new tax laws will also provide greater clarity and support for Nigeria’s energy transition, while positioning the country to remain a key player in the global oil and gas industry.