The Federal Government has introduced a new fiscal strategy in the form of the Upstream Petroleum (Cost Efficiency Incentives) Order, 2025 (the “CEI Order”). This Order creates a performance-based tax credit regime for upstream petroleum operators who achieve cost savings below government-set benchmarks.
In effect, the CEI Order flips the traditional approach to upstream taxation. Rather than companies “maximizing” or inflating their operating costs to avoid or reduce tax liability, the government is now encouraging operators to reduce expenditure to earn a tax credit. It is a pragmatic uno reversal strategy which rewards cost efficiency.
Issued on 30th April 2025 by President Bola Ahmed Tinubu, the CEI Order aims to align Nigeria’s upstream cost structure with global standards by incentivising operators to deliver measurable reductions in their Unit Operating Costs (UOC). The incentive takes the form of a tax credit, calculated based on the value of cost savings achieved relative to the benchmark set by the Nigerian Upstream Petroleum Regulatory Commission (the “Commission”).