The PIB seeks to provide legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry and development of Host
Communities. It contains 5 Chapters, 319 Sections and, 8 Schedules dealing with Rights of Preemption; Incorporated Joint Ventures; Domestic
Base Price and Pricing Framework; Pricing Formula for Gas Price for the Gas Based Industries; Capital Allowances; Production Allowances and
Cost Price Ratio Limit; Petroleum Fees, Rents and Royalty; and Creation of the Ministry of Petroleum Incorporated.
Below are the key changes:
1. The key objective is ensuring good governance and accountability, creation of a commercially oriented national petroleum company, and fostering a conducive business environment for petroleum operations.
2. Creation of the Nigerian Upstream Regulatory
Commission responsible for the technical and
commercial regulation of the upstream petroleum
operations; and the Nigerian Midstream and
Downstream Petroleum Regulatory Authority
responsible for the technical and commercial
regulation of the midstream and downstream
operations in Nigeria. The Commission and
Authority are exempted from the provisions of any
enactment relating to the taxation of companies or
Trust Funds.
3. Imposition of up to 1% levy on the wholesale price
of petroleum products sold in the country (0.5%
each for the Authority Fund and Midstream Gas
Infrastructure Fund)
4. Incorporation of a commercial and profit focused
NNPC Limited under CAMA within 6 months from
commencement of the new law with ownership
vested in the Ministry of Finance Incorporated
(and Ministry of Petroleum Incorporated) on behalf
of the Federation to take over assets, interests
and liabilities of NNPC. This structure is expected
to pave the way for eventually sale of shares to
Nigerians.
5. Any assets, interest and liabilities not transferred
to NNPC Limited will remain with NNPC until
extinguished or transferred to the government
after which NNPC shall cease to exist. Transfer
and sale of the shares are subject to approval by
the government and endorsement by the National
Economic Council.
6. NNPC Limited will earn 10% of proceeds of the
sale of profit oil and profit gas as management fee
while 30% will be remitted to Frontier Exploration
Fund for the development of frontier acreages in
addition to 10% of rents on petroleum prospecting
licences and mining leases.
The main objective is to promote the exploration
and exploitation of petroleum resources in Nigeria
for the benefit of the Nigerian people and
promote sustainable development of the industry,
ensure safe, efficient transportation and
distribution infrastructure, and transparency and
accountability in the administration of petroleum
resources in Nigeria.
8. Avoid economic distortions and ensure a
competitive market for the sale and distribution of
petroleum products and natural gas in Nigeria;
and avoid cross-subsidies among different
categories of consumers.
9. The Commission is required to develop a model
licence and model lease to include a carried
interest provision giving NNPC Limited the right to
participate up to 60% in a contract.
10. The main objective is to foster sustainable
prosperity within host communities, provide direct
social and economic benefits and enhance
harmonious co-existence.
11. Any company granted an oil prospecting licence
or mining lease or an operating company on
behalf of joint venture partners (settlor) is
required to contribute 3% – 5% (upstream
Companies) and 2% (other companies) of its
actual operating expenditure in the immediately
preceding calendar year to the host communities
development trust fund. This is in addition to the
existing contribution of 3% to the NDDC. The
Fund is tax exempt and any contributions by a
settlor is tax deductible.
12. Board of trustees and executive members of the
management committee may include persons of
high integrity and professional standing who may
not necessarily come from any of the host
communities.
13. Available funds are to be allocated 75% for
capital projects, 20% as reserve and 5% for
administrative expenses. However, a community
will forfeit the cost of repairs in the event of
vandalism, sabotage and other civil unrest
causing damage to petroleum facilities or
disruption of production activities.
14. The key objective is to establish a progressive
fiscal framework that encourages investment in
the Nigerian petroleum industry, provides clarity,
enhances revenues for the government while
ensuring a fair return for investors.
15. FIRS to collect Hydrocarbon Tax of 15% – 30% on
profits from crude oil production, CIT at 30% and
Education Tax at 2% which will no longer be tax
deductible. The Commission will collect rents,
royalties, and production shares as applicable
while the Authority will collect gas flare penalty
from midstream operations. Late filing of tax
returns will attract N10m on the first day and N2m
for each subsequent day the failure continues. A
N20m fine is applicable to an offense where no
penalty is prescribed.
16. Generally, expenses must be wholly, reasonably,
exclusively and necessarily incurred to be tax
deductible. However, a cost price ratio limit of 65%
of gross revenue is imposed for hydrocarbon tax
deduction purposes, any excess cost incurred
may be carried forward.
17. No tax deduction for head office costs while tax
deduction of interest on monies borrowed is
subject to the satisfaction of the commission that
the fund was employed for upstream operations
and the interest rates reflect market conditions.
18. Royalties are payable at the rates of 15% for
onshore areas, 12.5% for shallow water, and 7.5%
for deep offshore and frontier basins, 2.5% – 5%
for natural gas. In addition, a price-based royalty
ranging from 0% – 10% is payable to be credited
to the Nigerian Sovereign Investment Authority.
19. Gas utilisation incentive will apply to midstream
petroleum operations and large-scale gas
utilisation industries. An additional 5-years tax
holiday will be granted to investors in gas
pipelines.
20. The PIB repeals about 10 laws including the
Associated Gas Reinjection Act; Hydrocarbon Oil
Refineries Act; Motor Spirit Act; NNPC (Projects)
Act; NNPC Act (when NNPC ceases to exist);
PPPRA Act; Petroleum Equalisation Fund Act;
PPTA; and Deep Offshore and Inland Basin PSC
Act. It amends the Pre-Shipment Inspection of Oil
Exports Act while the provisions of certain laws
are saved until termination or expiration of the
relevant oil prospecting licenses and mining
leases including the Petroleum Act, PPTA, Oil
Pipelines Act, Deep Offshore and Inland Basin
PSC Act.
