President Bola Ahmed Tinubu’s signing of the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026 (DOEO 2026) deserves neither an automatic applause nor an instinctive criticism. My reaction is mixed — but constructively so, Wumi Iledare, Professor Emeritus of Petroleum Economics, a renown stakeholder has said in what he titled PEWI Commentary which was made available to The Valuechain.
I welcome the principle of using fiscal incentives to unlock investment in Nigeria’s deep offshore petroleum resources. Deepwater projects are capital-intensive, technically complex, long-dated and exposed to substantial geological, cost and market risks. Where fiscal terms have become a binding constraint to investment, fiscal recalibration can be economically rational.The announcement that the new framework could unlock as much as $50 billion of investment, beginning with the approximately $10 billion Bonga Southwest project, is therefore significant.
But investment announcements alone do not constitute public value. The more important petroleum economics question is: How much incremental value will the tax remission create for Nigeria relative to the economic rent and government revenue forgone? That is the test that should guide our assessment of DOEO 2026. Incentives are not the problem
There is sometimes an unfortunate tendency to frame petroleum fiscal policy as a choice between government revenue and investor incentives. That is too simplistic. A petroleum fiscal regime has two legitimate stakeholders with mutually dependent interests. The investor provides capital, technology, project management and assumes commercial and geological risk. The resource owner provides access to an exhaustible natural resource and expects an appropriate share of the economic rent.
The objective should therefore not be to maximise government take at the expense of investment, nor to maximise investor returns through generous fiscal concessions. It should be to maximise the mutuality of interests.
This is particularly important in deep offshore petroleum development. A barrel that remains undeveloped generates no production revenue, no employment, no local economic activity and no government revenue. But an incentive that merely transfers rent from government to an investor on a project that would have proceeded anyway does not necessarily create additional public value. The distinction is fundamental.
I suggest that DOEO 2026 should be evaluated against what I call the PEWI Fiscal Regime Test. A good petroleum fiscal regime should:
Attract investment
It must be competitive enough to attract risk capital into commercially viable opportunities that might otherwise remain undeveloped.
Capture economic rent
Once a project generates substantial economic rent beyond normal returns to capital and risk, the resource owner should capture an appropriate share.
Share risk and reward fairly
The fiscal system should recognise that government and investors face different but interconnected risks. When petroleum prices, costs, reserves or production outcomes change, the sharing of risk and reward should remain economically defensible.
The ultimate test is not government revenue in isolation. It is the net economic and social value generated for Nigeria over the life of the petroleum project. And, importantly: Create winners on both sides. This is where the idea of fiscal neutrality becomes useful.
Fiscal neutrality should not mean that government must receive exactly the same nominal tax revenue before and after a fiscal recalibration. That would defeat the purpose of an incentive. Rather, fiscal neutrality should mean that the incremental value created by the recalibration is sufficient to make both sides better off.
If a tax remission enables a project that otherwise would not have reached FID to proceed, Nigeria may receive additional production, exports, employment, domestic economic activity and government revenue. The investor earns an acceptable risk-adjusted return, while government captures part of the additional economic rent created.That is a genuine win-win fiscal recalibration.
Recalibration must create incremental value This distinction should be at the centre of the public debate about DOEO 2026.
Suppose a deep offshore project is economically marginal under the existing fiscal terms and therefore unlikely to reach FID. A targeted tax incentive changes the project’s economics sufficiently to make it investable. The investor wins because the project becomes commercially viable. Government wins because an otherwise undeveloped petroleum resource begins generating production and economic rent.
The economy wins because investment, production and associated economic activity increase. That is precisely what a well-designed incentive should accomplish. But consider the alternative.
If the project would have proceeded under the existing fiscal terms, and the tax remission merely increases investor returns without materially changing investment timing, production or development scope, then the remission may simply transfer economic rent from the resource owner to the investor.That is not necessarily fiscal reform. It may simply be rent redistribution.
The critical empirical question is therefore not: “How much investment does the incentive attract?” It is: “How much additional investment, production and economic rent does the incentive induce that would otherwise not occur?”That is the petroleum economics test.
The reference to Bonga Southwest makes this discussion especially important. Bonga Southwest is a legacy deepwater development with a long history within Nigeria’s petroleum fiscal framework. The precise fiscal treatment applicable to the project therefore matters greatly in assessing the effect of the new Order. It should not automatically be analysed as though every deepwater project sits under the same post-PIA fiscal architecture.
If, as appears to be the case, the project retains its legacy PPT-related fiscal context, then the analysis of the tax remission must begin with the applicable contractual and statutory terms governing that project.This is important because fiscal regimes are not simply collections of tax rates. They are economic contracts governing the sharing of petroleum rent over time.
The question is consequently not whether Nigeria should provide an incentive to Bonga Southwest. The question is whether the recalibrated terms improve the project’s investment economics sufficiently to generate incremental public value while preserving an appropriate government share of the rent.
The Petroleum Industry Act 2021 was conceived, among other things, to provide a more coherent and predictable petroleum fiscal and regulatory framework. Its philosophy should not be reduced to the maximisation of government take.
A sustainable fiscal system must balance investment attractiveness, competitiveness, government revenue, risk allocation and long-term resource value. This is why I remain particularly interested in the concept of mutuality of interests. Government and investors do not have identical interests. They should not. But their interests are not mutually exclusive either.
Government wants petroleum resources developed efficiently and wants an appropriate share of the resulting rent. Investors want commercially competitive projects, reasonable risk-adjusted returns and fiscal certainty. A good fiscal regime brings these interests together. A bad fiscal regime maximises one side’s objective at the expense of the other.
This is also where the PEWI E-QUAD provides a useful lens for evaluating DOEO 2026. Fiscal policy should not be assessed through a single metric such as government take or investor rate of return.
The design principles should include:
Efficiency — Does the incentive unlock economically efficient investment?
Equity — Is the incremental petroleum rent shared fairly?
Competitiveness — Can Nigeria compete successfully for global deepwater capital?
Simplicity — Are the fiscal provisions transparent, predictable and administratively workable?
Stability — Can investors rely on the terms throughout the investment horizon?
Sustainability — Does the arrangement create durable economic and public value?
These objectives inevitably involve trade-offs.That is why the PEWI insight remains relevant. Balance is more important than maximising any one objective.
A regime that maximises government take but kills investment is not optimal. A regime that maximises investment but unnecessarily sacrifices economic rent is equally suboptimal.The objective should be value optimisation, not objective maximisation.
I therefore welcome the direction of DOEO 2026, particularly if its objective is to unlock deep offshore investments that have been commercially constrained by the prevailing fiscal economics. However, I would reserve a final judgment on its quality until the detailed fiscal mechanics are available and we can determine:
the tax liability being remitted;
the projects and contracts covered;
the investment and FID conditions attached to the incentive;
the duration of the benefit;
the incremental investment induced;
the expected incremental production;
the economic rent created; and
the government’s expected share of that incremental rent.
The proposed 31 December 2029 FID window for existing deep offshore leases is particularly interesting. A time-bound incentive linked to actual investment and FID can be economically superior to an open-ended concession because it connects the fiscal benefit to the behaviour the policy seeks to induce. That is good fiscal design — provided the conditions are sufficiently clear and enforceable.
Nigeria should resist the temptation to describe every fiscal concession as an incentive without asking what economic problem it is solving. An incentive is justified when it changes behaviour and creates additional value.
If DOEO 2026 brings otherwise marginal deepwater projects to FID, increases production, expands the economic rent available for sharing and ultimately leaves both investors and the Nigerian public better off, then it represents a sensible fiscal recalibration. If, however, it merely reduces government take on investments that would have occurred anyway, the policy would deserve much greater scrutiny.
My position is therefore neither “tax incentives are bad” nor “investment attraction justifies any incentive.” It is simpler: A good fiscal regime must attract investment, capture economic rent, share risk and reward fairly, and create long-term public value. And a good recalibrated fiscal regime should create winners on both sides.That, ultimately, is the PEWI test for DOEO 2026: Does the remission enlarge the economic pie, or merely redistribute the existing pie?
If it enlarges the pie while preserving a fair share of the incremental rent for Nigeria, then the policy deserves support. If it merely redistributes existing rent, we should call it what it is — and ask whether that is consistent with the mutuality of interests intended by Nigeria’s petroleum fiscal framework.
OMOWUMI O. ILEDARE, PhD,
Sr. Fellow USAEE, Fellow NIPetE,
Fellow EI, Professor Emeritus,
Louisiana State University, Baton
Rouge, USA & Executive Director,
Emmanuel Egbogah Foundation,
Abuja, Nigeria.
