The Federal Government of Nigeria has introduced a significant value-added tax (VAT) exemption for a range of energy products, including diesel, Liquefied Natural Gas (LNG), Compressed Natural Gas (CNG), and electric vehicles, as part of broader efforts to reduce prices and promote cleaner energy.
The announcement, made by the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, on Wednesday, is aimed at easing the cost of living and improving energy security while fostering the nation’s transition toward more sustainable energy sources.
According to Mr. Edun, the VAT exemptions are part of the “VAT Modification Order 2024,” which specifically targets key energy products and infrastructure. The exemption covers items such as diesel, feed gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), electric vehicles, LNG infrastructure, and clean cooking equipment.
These measures are expected to significantly lower the cost of energy products for Nigerians, especially at a time when energy costs contribute heavily to inflation and the rising cost of living.
READ ALSO: Joe Biden Declares U.S. Opposition to Israeli Strike on Iran’s Nuclear Sites
“These measures are designed to reduce the cost of living, bolster energy security, and accelerate Nigeria’s transition to cleaner energy sources,” the statement from the Finance Minister read. By exempting these critical energy products from VAT, the government hopes to alleviate the financial burden on consumers and businesses, while simultaneously pushing forward its agenda for a more sustainable energy landscape in Nigeria.
Beyond the VAT exemptions, the government is also introducing tax incentives for deep offshore oil operations and gas production, as outlined in the “Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024.”
This policy aims to make Nigeria’s deep offshore oil sector more attractive to international investors by offering tax reliefs for deep offshore projects. The initiative is expected to position Nigeria’s deep offshore basin as a leading global destination for oil and gas investments, enhancing the country’s competitiveness in the highly lucrative energy sector.
Minister Edun emphasized that these reforms are part of a broader set of investment-focused policies led by President Bola Ahmed Tinubu. According to Edun, these reforms are aligned with Policy Directives 40-42, which focus on stimulating economic growth, enhancing the energy sector, and promoting foreign investment in Nigeria’s oil and gas industry.
“The Notice of Tax Incentives for Deep Offshore Oil & Gas Production introduces new tax reliefs for deep offshore projects,” Edun said.
“This initiative is aimed at positioning Nigeria’s deep offshore basin as a premier destination for global oil and gas investments. These reforms reflect the administration’s strong commitment to fostering sustainable growth in the energy sector and enhancing Nigeria’s global competitiveness in oil and gas production.”
READ ALSO: Atlético Madrid Penalized with Stadium Ban
The initiatives are a critical component of President Tinubu’s broader economic strategy, which seeks to stimulate both domestic and international investment while providing much-needed relief to the Nigerian populace amid a challenging economic environment.
With energy being a fundamental part of daily life, reducing the tax burden on key energy products is expected to have widespread benefits, from lowering household expenses to encouraging cleaner energy consumption across the nation.
Additionally, the government’s focus on deep offshore oil operations signals a long-term strategy aimed at solidifying Nigeria’s role as a significant player in the global energy market.
The combination of VAT exemptions and tax incentives forms a comprehensive approach to bolstering Nigeria’s energy sector and economic outlook, paving the way for more sustainable and investment-friendly policies moving forward.
By promoting cleaner energy sources and offering competitive incentives to oil and gas investors, the Federal Government hopes to position Nigeria as a global leader in both traditional and renewable energy sectors, while fostering economic growth and improving the quality of life for its citizens.