The federal government has announced that Value Added Tax (VAT) will no longer be applied to essential products such as cooking gas and diesel, among several other energy-related items. This development was disclosed as part of the government’s broader tax reform strategy aimed at stimulating growth in the energy sector.
On Wednesday, Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, unveiled two significant tax breaks during an announcement, marking a major shift in the administration's fiscal policy towards encouraging energy security and economic sustainability.
The statement issued by Mohammed Manga, the Ministry of Finance’s Director of Information and Public Relations, explained that these measures are part of a targeted effort to boost the oil and gas sector and transition towards cleaner energy solutions.
The new fiscal incentives include the VAT Modification Order 2024 and a Notice of Tax Incentives for Deep Offshore Oil and Gas Production. Both initiatives are grounded in the Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024, and they represent the government's push to strengthen Nigeria’s oil and gas industry amid global competition.
A critical component of these reforms is the VAT Modification Order 2024, which introduces exemptions on a wide array of key energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment. These measures are intended to make energy more affordable for Nigerians, reduce the cost of living, and accelerate the country’s transition to cleaner energy sources.
In addition to the VAT exemptions, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production offers new tax reliefs aimed at fostering investment in deep offshore oil and gas projects. This initiative seeks to position Nigeria’s deep offshore basin as a top global destination for oil and gas investments, further boosting the country’s standing in the international energy market.
The government emphasized that these reforms are part of a larger set of policy initiatives led by His Excellency, President Bola Ahmed Tinubu, in accordance with Policy Directives 40-42. They are designed to foster sustainable growth in Nigeria's energy sector while enhancing the country's competitiveness on the global stage.
The statement further read, “These VAT exemptions and tax incentives demonstrate the administration's steadfast commitment to bolstering energy security, driving economic prosperity, and creating a favorable investment environment in Nigeria's oil and gas sector.”
Mohammed Manga added, “With these bold initiatives, Nigeria is firmly on track to reclaim its position as a leader in the global oil and gas market. These fiscal reforms reflect the administration’s dedication to sustainable growth, reducing energy costs for Nigerians, and supporting the country's economic transition towards cleaner energy solutions.”
