The ownership and control of all minerals, oil and gas in Nigeria, its territorial waters and exclusive economic zone is vested in the Federal Government based on the provision of section 44(3) of the 1999 Constitution of the Federal Republic of Nigeria. The Federal Government is mandated to manage such natural resources in a manner as may be prescribed by the National Assembly.

The Petroleum Act of 1969 is the primary legislation governing petroleum activities in Nigeria. It provides comprehensive provisions for exploration, production and transportation activities in the sector. The Act, like the constitution, vests ownership of petroleum resources on the Federal Government of Nigeria. There are a myriad of other laws and subsidiary pieces of inter-related legislations that deal with specific operations of the industry.

The Petroleum Industry Governance Bill (PIGB) was passed by the Senate in 2017 and is expected to reorganise the legal and fiscal terms governing the oil and gas sector. The bill has recently been passed by the House of Representatives and only needs to be assented by the President before it becomes law. Companies operating with a concession or license in the oil sector are liable to pay royalties, petroleum profit tax and corporate income tax. In many cases, production-sharing contracts between the government and petroleum companies also determine the fiscal terms of oil and gas operations in the country. Companies involved in mining activities are liable to company income tax (20% or 30%), capital gains tax (10%), value added tax (5%) and education tax (2%) among others.

The state participates in the oil and gas sector through its national oil company, NNPC, and its various subsidiaries, which represent government interests in the various production arrangements and contracts in the oil and gas sector. The government is on the path of restructuring the NNPC as part of the reforms under the PIGB.

Licenses 

In accordance with the Petroleum Act, the Ministry of Petroleum Resources, through the Department of Petroleum Resources is empowered to oversee the license allocation process in the oil and gas sector. Oil and gas licenses are awarded through open tenders or direct negotiations, and the Minister of Petroleum Resources is empowered to grant licenses on a discretionary basis.

In the mining sector, the Mining Cadastre Office is responsible for granting licences and for maintaining a records of all license applications. Licenses are granted according to the Guidelines on Mineral Titles Application and on a “first come, first served” basis.

Petroleum Profit Tax

The Petroleum Profit Tax Act (PPTA) is the tax law that governs the taxation of companies engaged in petroleum operations. PPT payments are made either in cash or in-kind depending on the operating contract of the company. Variable taxes are applicable for the different terrains as; (i) Onshore/Shallow offshore: First five years (producing companies) 85%, First five years (new comers) 65.75%, Subsequent years (all companies) 85% (ii) Deep offshore (PSC): The PPT applicable to a contract area in a PSC is 50 flat of chargeable profits for the duration of the PSC.

Royalty on oil

The Petroleum (Drilling and Production) regulations Act No. 69 LFN of 1969 Section 60 stipulates that royalty on crude oil and casing head petroleum spirit  should be computed as: (i) Onshore areas 20% (ii) Offshore areas:

• Areas up to 100m water depth 18.5%
• Areas up to 200m water depth 16.5%
• Areas from 201 to 500m water depth 12.5%
• Areas from 501 to 800m water depth 8%
• Areas from 801 to 1000m water depth 4%
• Areas beyond 1000m water depth 0%

Royalty on gas

Royalty on gas is based on gas sales. The volume of gas produced and sold from the fields within the concession is in line with the following fiscal terms: (i) Onshore Areas 7% (ii) Offshore Areas 5%

Company Income Tax

Company Income Tax is tax paid on profit arising from gas operations of companies. Oil and Gas companies pay Company Income Tax in USD, on profit arising from gas operations.

Objectives of beneficial ownership transparency in Nigeria

• Anti-corruption agenda and the ongoing oil sector reforms.
• Government’s commitment to implementing Open Contracting Data Standard, and the establishment of a publicly accessible registry of the licensed owners of all companies operating in Nigeria.
• Elimination of all forms of corruption through transparency and accountability in the extractive industry.

Progress on implementing beneficial ownership disclosure 

Nigeria proved its desire to implement beneficial ownership when they participated in the beneficial ownership pilot in 2015. Both the oil and gas and the mining audit provides legal ownership for the companies, which in some cases are natural persons. The report does not confirm if these natural persons are legal owners or beneficial owners. Concerns over confidentiality in disclosing beneficial owners, lack of political will and legislation requiring ownership disclosure were key challenges outlined in Nigeria's evaluation report. 

Nigeria EITI plans to work with Department of Petroleum Resources (DPR) of Ministry of Petroleum Resources and Mining Cadastre Office (MCO) to establish a beneficial ownership register of the extractive sector before the January 2020 deadline. NEITI intends to organize a series of technical workshops to build capacity in beneficial ownership disclosure. Read Nigeria's beneficial ownership roadmap below for more information.

Nigeria is Africa's largest producer of crude oil. according to the NEITI’s 2016 Audit, total crude oil production stood at about 660,000 mbbls, falling from almost 780,000 in 2015 - 15% drop. There has been a steady decline in production from 2012 to 2016, with the largest drop occurring in 2015 and 2016. In terms of exports, a total of 211.5 million barrels of crude oil was exported. In the gas sector, a total of 3,051,249 mmscf was produced, a decline of 6.13% from 2015 production volume. The total gas sold in 2016 was 1,422,939.05 mmscf (30,991,612.55mt). The federation’s sales accounted for 46% of the total i.e. 654,871.31mmscf. Sales value decreased by 28.8% in 2016 which was due to decrease in the quantity sold despite marginal increase in average selling price.

Nigeria is richly endowed with various types of mineral resources. The government is committed to diversifying the nation's economy; from dependence on oil revenue to non-oil revenues. In September 2016, the Federal Government of Nigeria through the Ministry of Mines and Steel Development, re-launched the Solid Mineral Policy Roadmap, aimed at ensuring policy continuity and consistency in the sector. During the year, 2016, the total volume/quantity of actual mineral production was 41,874,611.02 tonne, this is a 6% increase from the 2015 production volume.