FG moves to streamline 270 oil industry taxes, levies

The Nigerian Federal Government has initiated efforts to simplify the complex web of over 270 taxes, levies, and statutory charges burdening the oil and gas industry. Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, announced that global consulting firm PwC has been tasked with benchmarking Nigeria's fiscal regime against international standards.

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When the Chairman of IPPG was talking, he made mention of the multiplicity of fees and rents. It’s been a major concern that Nigeria has over 270 fees, taxes and rents in this sector. It is true. But that doesn’t mean we’re not doing something about it.

This initiative comes in response to significant concerns raised by indigenous oil producers, who have described Nigeria's oil and gas sector as potentially the most heavily taxed globally. Adegbite Falade, Chairman of the Independent Petroleum Producers Group, highlighted that the cumulative burden of these charges is diminishing operator competitiveness, deterring investment, and jeopardizing the viability of mature oil assets. He urged the government to harmonize these numerous impositions.

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Our attention was drawn by OPTS to this matter. And since then, we’ve had several engagements, and I’m happy to announce to you that part of the steps we’ve taken is to commission PwC to do a global benchmarking. IPPG, together with NUPRC, came together under my directive to commission PwC to do a global benchmarking.

Minister Lokpobiri acknowledged the validity of these complaints, stating that the government is actively addressing the issue. He revealed that engagements with industry stakeholders have been ongoing, and the commissioning of PwC for a global benchmarking study is a concrete step. The minister noted that while the sheer number of taxes appears alarming, many involve small amounts but necessitate extensive administrative processes, increasing compliance costs and reducing operational efficiency.

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Sometimes when you hear that you have 270 taxes and levies, the amount may be small. Some could be cents. Why do you take the same paperwork to pay $1m as you want to pay one cent?

Operators have reported being forced to process hundreds of invoices for charges amounting to mere cents or dollars. Lokpobiri cited concerns from the Oil Producers Trade Section (OPTS), which highlighted the inefficiency of processing numerous small invoices. The government aims to group these charges to streamline payments and improve operational efficiency within the sector.

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From the report I got from OPTS, they said, ‘Look, even the volume of fees they want to pay for the legal processing is three cents, five cents, or one dollar. Why don’t we group all together? If I’m paying, can’t I pay everything once instead of making the company process 270 invoices?’