By Adeyinka Adeyefa, Esq.
​In my years of legal practice, I’ve had to handle cases across many different fields. While I don’t specialize in the oil and gas sector, I’ve learned that the principles of good law—fairness, clarity, and accountability—are universal. When I first read about the Upstream Petroleum Operations (Cost Efficiency Incentives) Order, 2025, it caught my attention not just as a lawyer, but as a concerned citizen. It’s a significant development, and it raises a lot of questions that go beyond just industry specifics.
​For years, the government has relied on a straightforward system of taxes and royalties to get revenue from oil companies. It’s a system that has served us for a long time, but it’s not perfect. Oil prices are always fluctuating, and companies are always looking for ways to cut costs. The government, in turn, wants to maximize its share.
This is where the new Order comes in. The President, using his powers under the Companies Income Tax Act (CITA), has created a new incentive. The Order essentially says: “If you, an oil company, can find ways to be more efficient and spend less on your operations, we’ll reward you with a tax break.” This is a new and innovative approach because it directly ties fiscal incentives to operational performance. It’s a move away from just taxing what’s produced, to actively encouraging cost-saving.
This Order could have some very positive effects. For the government, it could lead to more tax revenue. If companies are spending less to extract oil, their net profits will be higher. A higher profit means a larger tax base, which could mean more money for the country. It’s a simple idea: by making the industry more efficient, everyone stands to gain.
For the oil companies, it’s a great opportunity. They already have the motivation to be cost-effective. Now, they have a clear financial reason to do so. This could push them to invest in better technology, streamline their logistics, and find more innovative ways to run their businesses.
And for us, the general public, a more efficient oil sector ultimately means a more stable source of national income. It sends a message to international investors that Nigeria is serious about creating a business-friendly environment, which could attract more foreign investment.
As a lawyer, I’m trained to look for potential problems. And this Order raises some serious questions that need to be addressed.
Transparency: The biggest concern I have is how this will be implemented. The Order gives a lot of power to grant exemptions, but the rules for how those exemptions are granted need to be very clear. We can’t have a situation where these incentives become special favors for a select few. The process must be transparent, auditable, and open to all operators who meet the criteria.
How Does it Fit with Existing Laws?
We already have the Petroleum Industry Act (PIA), a major law designed to reform the oil sector. My question is, how will this new Order interact with the PIA’s existing fiscal rules? We can’t have conflicting regulations; it would create confusion and uncertainty for investors. As a lawyer, nothing is more frustrating than an ambiguous legal framework.
Measuring ‘Efficiency’: This is a huge practical challenge. What does “cost efficiency” even mean in an industry as complex as oil and gas? Will it be based on a reduction in spending from a previous year? A specific project? The government needs to define this with clear, objective metrics. Without that, it will be impossible to apply the Order fairly.
Enforcement: Finally, who will be responsible for making sure this Order is followed? What happens if a company disagrees with a decision? Is there a clear process for resolving disputes? A great law is useless without a strong enforcement mechanism.
While I don’t specialize in this area, my legal training tells me this Order is a bold move. It has the potential to make our oil and gas sector more disciplined and more competitive. But its success will depend entirely on how it’s implemented. It must be applied with the highest standards of transparency, fairness, and legal clarity.
The law is a tool for progress, and I hope this Order is used to build a stronger, more sustainable future for Nigeria.
