Putting Every Barrel to Work: Tinubu’s Executive Order Signals a New Era of Cost Efficiency and Investment in Nigeria’s Oil and Gas Sector Introduction In a landmark policy shift designed to reposition Nigeria’s oil and gas sector for greater efficiency, competitiveness, and fiscal resilience, President Bola Ahmed Tinubu has signed the Upstream Petroleum Operations Cost Efficiency Incentives Order, 2025, a strategic Executive Order aimed at reducing operational costs, enhancing revenue generation, and attracting global investment. Coming at a time of tightening global capital and fluctuating oil prices, the Order sets the tone for a disciplined, performance-driven upstream sector that aligns investor incentives with Nigeria’s national development goals. Key Provisions of the Executive Order 1. Cap on Tax Credits: 20% of Annual Tax Liability The Order limits tax credits to a maximum of 20% of a company’s annual tax liability. Objective: Safeguard public revenue while continuing to incentivize efficient and responsible operators. Significance: A move towards fiscal sustainability by curbing revenue leakage from aggressive tax credit claims, a persistent challenge in the sector. 2. Performance-Based Tax Incentives Companies that achieve verifiable cost savings in line with defined industry benchmarks will qualify for performance-based incentives. This introduces a results-oriented tax regime, where efficiency becomes the basis for fiscal rewards. 3. Annual Cost Benchmarking by Terrain The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is mandated to: Conduct annual benchmarking studies by terrain — onshore, shallow water, and deep offshore. Assign Unit Operating Cost (UOC) reduction targets to lessees and licensees. Issue terrain-specific operational cost guidelines pursuant to the Petroleum Industry Act (PIA). Publish the methodology for benchmarking and consult stakeholders before issuing guidelines. 4. Integrated Oversight and Implementation Mechanism The Special Adviser to the President on Energy, Mrs. Olu Verheijen, is tasked with inter-agency coordination and outcome-based implementation. The focus is on translating policy intent into measurable, investor-aligned outcomes. Strategic Justifications and Sectoral Context ✅ Addressing High Operating Costs Nigerian upstream operating costs have long exceeded global averages, due to: Prolonged project execution timelines Bureaucratic delays Rigid local content compliance The Executive Order directly tackles these inefficiencies, creating room for leaner operations and improved project delivery timelines. ✅ Promoting Global Competitiveness With rising competition from emerging markets and tightening ESG standards, Nigeria must offer predictable, transparent, and competitive fiscal regimes. By linking incentives to cost performance and reducing regulatory friction, the Order aims to restore Nigeria’s attractiveness to global capital. ✅ Enhancing Revenue Mobilization The tax credit cap and efficiency-linked rewards help align investor interests with national revenue objectives, thereby improving: Government take Return on investment (ROI) for operators Macroeconomic stability Implications for Stakeholders For Upstream Operators Operators must now embed cost discipline into their strategic planning. There is an urgent need to: Digitize operations for better cost control, Optimize supply chain management, and Report performance transparently to benefit from available incentives. For Government and Regulators The NUPRC must build capacity to conduct reliable benchmarking, issue practical guidelines, and monitor terrain-specific compliance. The FIRS and Ministry of Finance must align tax audit processes with the new cost-efficiency indicators. For Investors The Order sends a strong signal of reform continuity and stability, enhancing investor confidence. Nigeria now presents a clearer value proposition— reward for efficiency, transparent processes, and a data-driven fiscal framework. Policy Significance: Building on 2024 Reforms This Executive Order is not isolated but builds upon the 2024 Presidential Reform Directives, which introduced: Enhanced fiscal terms under the Petroleum Industry Act (PIA), Faster contract approval processes, Aligned local content practices with commercial viability. It represents a transition from policy intent to execution, focusing on outcomes, accountability, and competitiveness. Conclusion President Tinubu’s Executive Order, “Putting Every Barrel to Work”, redefines how Nigeria approaches oil and gas fiscal governance. By linking tax incentives to measurable efficiency gains, capping revenue-draining tax credits, and setting terrain-specific benchmarks, the administration is laying the foundation for a more resilient, investor-friendly, and economically inclusive energy sector. This is a call to action for all stakeholders — government, operators, investors, and citizens — to ensure that every barrel of oil contributes maximally to Nigeria’s prosperity. Recommendations for Stakeholders Stakeholder Operators Implement cost-saving technologies, engage in benchmarking readiness, and align operations with UOC targets NUPRC Finalize and publish terrain-specific guidelines; ensure transparent methodology FIRS & Finance Ministry Align tax review and credit assessment to new cost-efficiency metrics Investors Monitor reform execution closely for re-entry or expansion decisions Civil Society Demand transparency in implementation and monitor national value retention Olatunji Abdulrazaq CNA, ACTI, ACIArb(UK) Founder/CEO, Taxmobile.Online