April 21, 2024

AEF reacts to Tinubu’s Executive Order, aims at promoting investment in oil & gas

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Teju Oladele

The Arewa Economic Forum (AEF) has reacted to the three executive orders signed by President Bola Ahmed Tinubu which are aimed at improving the investment climate and positioning Nigeria as the preferred investment destination for the oil and gas sector in Africa.

The Chairman of the Forum, Alhaji Shehu Ibrahim Dandakata, said in a press statement on Monday that the signing of the executive orders is a step in the right direction.

He however observed that there are critical components of the petroleum industry in Nigeria which the executive orders have missed.

Alhaji Dandakata noted that the Forum is concerned that the orders did not support frontier businesses in the northern part of the country, saying, “we believe that the signing of the new executive orders is a positive step, but we also feel that there is a critical missing link somewhere.

“The government should consider including the frontier businesses in the Northern region in its plans, and we at AEF can provide suggestions on how to encourage investments in this area having experts and professionals in the sector,” he said.

The chairman also expressed his concern over the security situation in the region, saying, “one of the key things that is hampering the development of frontier fields just like the Kolmani, is the issue of how the investor is going to recover his money.

“Now, from Kolmani to any export terminal is about 600-700 kilometers. The pipeline has to be built to go there. But with the security situation of the country or the way the country is, even the little pipelines that we have in the south, the 30, 40 kilometers are being continuously vandalised.

“So, it doesn’t make sense for someone to invest and build a pipeline for it to be constantly vandalised. The whole thing is that most investors are looking at it in that fashion, that they are going to invest and they are not likely to recover their money. The issue here is, we in AEF, have ideas on how to incentivise this investment.”

President Tinubu had recently signed three executive orders on: ⁠Introduction of fiscal incentives for non-associated gas, midstream and deepwater developments; Streamlining of contracting process to compress the contracting cycle to six months and ⁠the application of the local content requirements without hindering investments or cost competitiveness.

While speaking on the Executive Order, the information Minister, Mohammed Idris Malagi said Nigeria would offer tax credits and streamline contracting processes for new oil and gas projects in a move to attract much-needed investment.

He said President Tinubu executed the policy to improve the investment climate and position Nigeria as the preferred investment destination for the Oil & Gas sector in Africa.

He said following extensive engagements, analyses, and benchmarking with other jurisdictions, the President initiated the amendment of primary legislation to introduce fiscal incentives for Oil & Gas projects, reduce contracting costs and timelines, and promote cost efficiency in local content requirements.

Recognizing the urgency to accelerate investments, the President directed Fiscal Incentives for Non-Associated Gas (NAG), Midstream and Deepwater Developments where gas tax credits shall apply to non-associated gas (NAG) greenfield developments in onshore and shallow water locations, where the hydrocarbon liquids fall between 0-100 barrels per million standard cubic feet of gas.

A 25 percent gas utilization investment allowance shall apply on qualifying expenditure on plant and equipment incurred by a gas utilization company in respect of any new and ongoing project in the midstream oil and gas industry.

The President also directed Streamlining of Contracting Processes, Procedures, and Time lines where the Ministry of Finance Incorporated (MOFI) and the Ministry of Petroleum Incorporated (MOPI) would take steps to procure the Nigerian National Petroleum Company Limited to raise the contract approval thresholds for Production Sharing Contracts (PSCs) and Joint Operating Agreements to not less than $10 million or the Naira equivalent. The directives are aimed at compressing the contracting cycle to 4-6 months, ultimately reducing project schedules, expediting the delivery of oil and gas products to the market, and increasing value to the country.

Similarly there is also Local Content Practice Reform as the President directed that the Nigerian Content Development and Monitoring Board in its implementation of the Nigerian Oil and Gas Industry Content Development Act, 2010 (“Local Content Act”) should consider the practical challenges of insufficient in-country capacity for certain services, and act in a manner that does not hinder investments or the cost competitiveness of oil and gas projects. By providing flexibility with the application of the Local Content Act, local operators will be encouraged to increase their capacity, thereby creating additional business opportunities, upskilling of the workforce, and ultimately creating more jobs and boosting economic growth.

These incentives were developed in collaboration with the Federal Ministry of Justice, Federal Ministry of Finance, Federal Ministry of Petroleum, Federal Ministry of Budget and Economic Planning, Federal Inland Revenue Service (FIRS), Nigerian National Petroleum Company Limited (NNPCL), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Commission (NMDPRA), and the Nigerian Content Development and Monitoring Board (NCDMB).

The Special Adviser to the President on Energy has been directed to continue coordinating the aforementioned stakeholders to ensure the implementation of these directives within a stipulated timeframe.

°The President strongly believes that private sector-led growth enabled by clear and inclusive government policies is the most enduring path to prosperity for all Nigerians. The President is committed to sustained engagement and collaboration with key investors to ensure we improve the ease of doing business in Nigeria,” the Minister concluded.

Credit : PRNig.

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