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

On 4 November 2019, His Excellency, President Muhammadu Buhari, GCFR, assented to the Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Act, 2019 (“the Amendment Act”) following its passage by the National Assembly in October 2019. The Amendment Act introduces a combined production and price-based royalty system to replace the existing production-based royalty system, which varies according to areas of operations.

The new royalty regime specifies a baseline royalty of 10% for crude oil and condensates produced in the deep offshore (greater than 200 meter water depth) and 7.5% for the Frontier and Inland Basin. In addition to the baseline royalty, a royalty based on the applicable price of crude oil, condensate and natural gas will apply, but only when the price exceeds $20 per barrel 1. The graduated royalty rates are shown below: 

• from $0 up to $20 per barrel 0% 
• above $20 and up to US $60 2.5% 
• above $60 and up to US $100 4.0% 
• above $100 and up to US $150 8.0% 
• above $150 10.0%

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. 

To meet the requirement of EITI of establishing a BO register by 1 January 2020, NEITI has developed a BO register for the extractive sector, the register is searchable by companies, assets and individuals. From a user perspective, the register performs and functions well. Significantly, the BO data is available for bulk download, allowing for systematic analysis of all companies on the register. There are however gaps, the register does not include unique identifier for companies, also those listed as beneficial owners are other legal entities registered in offshore jurisdiction. So, there are other efforts by regulators in the oil and gas and the mining sector to develop registers, NEITI is working with them to ensure the gaps that exist in its register is covered by the current register being developed by DPR and MCO.

Nigeria is Africa's largest producer of crude oil. According to the NEITI’s 2018 Audit, total crude oil production stood at about 701 mbbls, increasing slightly from 690 million barrels in 2017 - 2% increase. There. In terms of exports, a total of 147.9 million barrels of crude oil was exported. In the gas sector, a total of 2,909 mmscf was produced, a decline of 5% from 2017 production volume of 3,051 mmscf. The total gas sold in 2016 was 1,252 thousand metric tons valued at US$610.676million..

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, 2018, the total volume/quantity of actual mineral production was 46,680,658.24 tonne.