1.

INTRODUCTION
1.1 Introduction to Solid Mineral in Nigeria
Under the Nigerian Minerals and Mining Act, 2007, section 1 (1) states that
the entire property in and control of all mineral resources in, under or upon any
land in Nigeria, its contiguous continental shelf and all mines, streams and ater
courses throughout Nigeria, any area co!ered "y it territorial aters or
constituency and the e#clusi!e economic $one is and shall "e !ested in
%o!ernment of the &ederation for and on "ehalf of the people of Nigeria'(
)he mineral sector in Nigeria is currently dominated "y artisanal and small*scale
mining operators( )hey are mainly informal, or+ing ith rudimentary methods
and limited technical training, social pro!ision and en!ironmental consideration( ,t
is only in -uarrying that large*scale operations e#ist ith the construction
companies (stone aggregates and laterite) and cement manufactures (limestone)
dominating(
,n a "id "y the %o!ernment to attract foreign in!estors to the Nigerian solid
minerals sector there has "een a transformation process going on in the industry
hich has resulted in the folloing.
,ncrease in mineral e#ploration acti!ities arising from more funding and
repositioning of N%/A to effecti!ely carry out geological and geochemical
mapping has stranslated into the production of geological data(
)he creation of the M01 charged ith the administration of mineral titles
on a first*come*first*ser!e and use*or*lose*it "asis resulting in increase in
mineral title ac-uisition "y "oth local and international mining operators(
,ncreasing the capacity of ministry staff to carry out designated functions as
ell as increasing the capacity of the A/M to carry out mining in a
sustaina"le manner through the acti!ities of the /MM23(
4nactment of rele!ant las and regulations needed to regulate mineral
e#ploration and e#ploitation acti!ities in a transparent manner, )he Nigerian
Minerals and Mining Act of 2007, National Minerals and Metals 3olicy
2005, Nigerian Minerals and Mining 2egulations 2011(
6oe!er MM/7 has identified thirty*four (89) minerals of economic importance
in Nigeria across the si# regional mining $ones( And also the MM/7 has also
highlighted a num"er of strategic materials that ha!e the potentialities to contri"ute
significantly to Nigeria:s economic de!elopment( )hese include "arite, gold,
"itumen, iron*ore, lead;$inc coal and limestone(
1.1.1 Taxation of the Solid Minerals
,t is a statutory o"ligation of e!ery limited lia"ility companies to file their annual
ta# returns ith &,2/, on or "efore 80 <une of e!ery year( And also any
organisation that has more than fi!e (=) employees is e#pected to deducted at
source from employee:s monthly salaries (3A>4) and remit to rele!ant ta#
authorities (&,2/ and ?,2)( )he rates of ta#ation chargea"le are stipulated in the
3ersonal ,ncome )a# Act 2011 (as amended)(
1.2 Introduction to Petroleu Taxation in Nigeria
)he urge to e#tract as much re!enue as possi"le from a non *renea"le patrimonial
inheritance that is fast depleting, has seen many countries toy ith one fiscal
regime for petroleum after another( ,n doing so hoe!er, they often forget the role
ta# alloances and other incenti!es can play in increasing their re!enue "ase "y
attracting more in!estments to the industry( &or others, the alloances and
incenti!es due to poor design, ha!e failed to address the difficulties and high ta#
"urden often associated ith the fiscal instruments and therefore cannot promote
in!estments(
)his has "ecome more pro"lematic for countries hose economies are dependent
on oil, as they cannot finance social and economic groth in the a"sence of a large
oil re!enue "ase( Nigeria is not an e#ception to this( 1il accounts for a"out @0*
@=A of its e#port re!enues, o!er @0A of foreign e#change earnings and a"out 50A
of go!ernment re!enue( )he oil industry is thus the main hu" of the Nigerian
economy, and needs to "e sustained if the country is to achie!e real economic
groth(
)he 1il glut of the 50:s that greatly impacted on glo"al oil prices and the !ery lo
1340 -uota, foisted on the country !arious fiscal regime for petroleum especially
the petroleum profit ta# of 5= A and 20A 2oyalty regime, all in a "id to get more
re!enue to oil the Nation:s economy( /ince then Nigeria has had lofty aims for its
oil industry, including the desire to increase reser!e from 89 "illion "arrels to 90
"illion "arrels "y 2010= and su"se-uently its 1340 -uota, optimi$ation of oil
re!enue, increase in the ,ndustry:s local content, and continuous attraction of
foreign in!estment as a ay of promoting and sustaining in!estment in the oil
industry(
?ut the "ane of the industry has "een the failure of the alloances and incenti!es
to attract more in!estment and therefore more ealth capa"le of sustaining the
future groth of the economy e!en hen the oil ells ha!e dried up( )here is the
need to ha!e i n place, a fiscal regime that ill, through ta# alloances and other
incenti!es "ecome in!estor friendly "y "alancing go!ernment needs ith those of
in!estors through its sta"ility, efficiency and fle#i"ility(
)he failure of ta# alloances and incenti!es to achie!e go!ernment:s desire in this
respect therefore merits an e#amination( ,t is also !ital to anser the follo up
-uestion, hich is, ho can the ta# alloances and the entire fiscal regime for
petroleum "e made to promote and sustain in!estment in the Nigerian oil industryB
3ro!iding ansers to the a"o!e -uestion "ecomes imperati!e not only for the
go!ernment and its citi$ens ho need the oil re!enue for economic de!elopment,
"ut also for in!estors and other sta+eholders, ho ill rely on it for in!estment
decisions in the midst of !ery competiti!e glo"al ta# climate(
)his paper in ansering these -uestions, ta+es a loo+ at the special nature of the
petroleum industry and go!ernment:s o"Cecti!e in ta#ing the industry( ,t assesses
the need for the introduction of alloances and incenti!es to ameliorate the often
huge ta# "urden placed on in!estors( ,n doing so, it ma+es a detailed and analytical
study of the Nigerian fiscal regime for petroleum, e#amining the incenti!es and
alloances therein, and their capacity to promote and sustain in!estment( ,n
identifying the constraints and limitations to the or+a"ility of these fiscal
incenti!es, it dras a comparison "eteen Nigeria and some oil producing
countries (130s) and gi!es an insight into ho these "ottlenec+s can "e remo!ed
to encourage a sustained de!elopment of the Nigerian oil industry(
,n can!assing these issues, principles of "asic geology, elementary economics, and
la and petroleum ta#ation are applied in a methodology that is "oth analytical and
prescripti!e( &or a "etter understanding of the issues at sta+e hoe!er, an o!er!ie
of the distincti!e nature of the petroleum industry petroleum industry, necessitating
a separate &2 and special ta# treatment is first gi!en(
2. T!" SP"CI#$ N#TUR" O% T!" P"TRO$"UM INDUSTR&
0ompared to other economic acti!ities, the petroleum industry has ider attraction
"ecause of its special nature, hich stems from the fact that till date, it remains the
largest and most important industry in the orld( ,t has continuously pro!ided the
orld:s energy and industrial needs, from transportation to agriculture( ,t has also
"een a money*spinner first for the 130s, pro!iding them ith the opportunity of
economic and social de!elopment, and second, for the multinational oil companies
(MN10s) engaged in its e#tractionD and "y e#tension the industriali$ed mar+et to
hich the earnings of the MN10s are repatriated(
A cheap alternati!e to oil has "een difficult to come "y and the orld:s total oil
consumption continues to increase and is proCected to gro "y a"out 8EA "y 2010(
)he industry also stands miles apart from others as illustrated in ta"le1, due to the
folloing factors(
2.1 INDUSTR& RIS'S
No industry epitomi$es these ris+s "etter than the oil industry( )he hole of the
industry, from e#ploration to production is filled ith ris+s( &rom the high
possi"ility that a hole in the ground' ill not yield reser!es, the ris+s that the
reser!es if disco!ered ill not "e in commercial -uantity to Custify the in!estment,
the technology ris+ in oil field de!elopment, to the failure of operations and
!agaries of international oil prices( )hus upstream in!estment remains !ery ris+y
and unpredicta"le*most times de!elopment of ne fields in!ol!e the sin+ing of
capital "efore actual production re!eals the reser!oir characteristics, unli+e most
other economic acti!ities(
Ta(le 1) Illustration of the (asic differences (ased on assu*tions onl+. Most
of the factors also hold true for the Mining industr+ though ,ith soe
differences
2.2 !I-! COST O% IN."STM"NT1/
&rom e#ploration to e!entual production, the cost of de!eloping and operating an
oil field is !ery high and pro"a"ly higher than any other industry( )he technology
needed for all acti!ities in the industry is !ery e#pensi!e( )he scale and si$e of
in!estment is usually !ery high and at times higher than that in the mining
industry( )he total mar+et capitalisation of listed oil companies orldide is more
than F1000 "illion, hile commercial "an+ lending to the industry is an annual
a!erage of U/F1 "illion ran+ing it the "iggest in terms of si$e and scale of
in!estment(
2.0 $ON- $"#D1TIM"
,t ta+es a longer time for in!estment in oil fields to start yielding returns than any
other industrial acti!ity, "ecause of the huge cost of in!estment and the long time it
ta+es "eteen e#ploration, de!elopment and the production of the first "arrel of
oil( 1ther factors include the role of the international mar+et in determining the
price of the commodity, coupled ith the high profile politics and interests that go
ith it( )here is alays the ris+ of price fall as oil price is not static and is more or
less not determined "y the MN10s, "ut to a large e#tent "y the dictates of demand
and supply(
)he economic rent generated from oil has alays "een higher than that generated
from any other industry including mining( At times, there are lots of political ris+s
associated ith the location of oil fields (hich due to their fi#ed nature must "e
drilled here they are found) especially in the de!eloping countries hich
incidentally are home to most of the orld:s oil reser!es, accounting for a"out
@0A28 of the pro!en oil and gas reser!es in the orld( 1il depletes and is also
non*renea"le, a "arrel once produced, cannot "e produced again('
All these including the need on one hand, to ensure that the /tate as resource
oner, recei!es an appropriate and e-uita"le share of the economic rent accruing
from oil e#traction, and the need on the other hand, to compensate the in!estor
ade-uately, for the e#cessi!e ris+s and costs associated ith the in!estment, ma+e
!ery strong case for a special ta# regime for the petroleum industry(
0. T!" O23"CTI."S O% P"TRO$"UM T#4#TION
)he "asic reasons for ta#ation in any economy centre on the need to raise re!enue
for economic and social de!elopment and to guide ta#payers: "eha!iour( 6oe!er
the o"Cecti!es of go!ernment in ta#ing the 3, can "e analysed as follos.
0.1 T!" P#TRIMONI#$ %#CTOR
,n many 130s, oil is treated as a patrimonial inheritance "elonging to the hole
nation including future generations( )a#ing it "ecomes a ay of achie!ing
go!ernment:s o"Cecti!e of e#ercising right and control o!er this pu"lic asset(
%o!ernment may impose (!ery high) ta# as ay of regulating the num"er of
participants in the ,ndustry and discouraging its rapid depletion in other to
conser!e some of it for future generation( )his in effect ill also achie!e
go!ernment:s aim of controlling the petroleum sector de!elopment(
0.2 T!" R"."NU" %#CTOR
)he high profit profile of a successful in!estment in the oil industry ma+es it a
!erita"le source for satisfying go!ernment:s o"Cecti!e of raising money to meet its
socio*political and economic o"ligations to the citi$enry( ,n many 130s, ta#es
from the oil industry e#ceed ta#es from other sectors, especially for those hose
economies are not di!ersified(
0.0 5"#$T! R"1DISTRI2UTION
3etroleum ta#ation has "ecome an instrument for ealth re*distri"ution "eteen
the ealthy and industrialised economies represented "y the MN10s, ho on the
technology, e#pertise and capital needed to de!elop the industry and the poor and
emerging economies from here the petroleum resources are e#tracted( )he
MN10s repatriate their earnings and often !ery huge profit to their ealthy
countriesD e#tracting rent from them in the form of petroleum ta#ation is a ay of
achie!ing the o"Cecti!e of ealth re*distri"ution, among these nations(
0.6 "N.IRONM"NT#$ %#CTOR
)his ould ordinarily come under the o"Cecti!e to guide the "eha!iour of
economic agents( )he high potential for en!ironmental pollution and degradation
stemming from industry acti!ities ma+es it a target for en!ironmental ta#ation, as a
ay of regulating its acti!ity and promoting go!ernment:s -uest for a cleaner and
healthy en!ironment( 0leaner production may "e achie!ed "y imposing ta# on it
for pollution and other en!ironmental offences(
0./ OT!"RS
)a#es that come in the form of training fees and contri"ution to education funds
underlies go!ernment o"Cecti!e of de!eloping indigenous technology, manpoer
and e#pertise in the industry, through contri"ution and ta#es from mostly the
MN10s( %o!ernment in imposing these ta#es may promote or unittingly cripple
the industry especially here the ta#es are either front loaded or not "ased on
profit( Ghen these go!ernment o"Cecti!es are carried out, it aligns the petroleum
industry to the o!erall social and economic policy of the go!ernment, hich to a
large e#tent determines the nature of a country:s fiscal regime for petroleum(
6. T!" RO$" #ND IMPORT#NC" O% T#4 #$$O5#NC"S
)a# alloance is a form of incenti!e used to ameliorate the difficulties and high
ta# "urden inherent in a fiscal regime in order to induce, promote and sustain
in!estment in that fiscal regime(
)hough incenti!es it has "een argued, are poor instruments for ameliorating
negati!e factors inherent in a country:s in!estment climate, they still go a long ay
in determining in!estors: decisions on hat and here to in!est especially here
other ris+s (e(g( political or la"our ris+s) associated ith the in!estment is the same
for a gi!en set of countries, say A and ? as in ta"le 2( )a# alloances may not
ameliorate the political ris+s of an in!estmentD "ut ill go a long ay in addressing
the im"alances (especially "eteen the go!ernment and the in!estor) arising from
a !ery high ta# "urden( ,t is on this "asis that the role and importance of )a#
alloance is discussed here and ith particular reference to the petroleum industry(
Ta(le 2)
A &iscal regime and the inherent ta# alloances gi!e a picture of ho much of the
in!estment ris+s the go!ernment is illing to share ith the in!estor, and therefore
affect the in!estor:s decision "ased on his analysis of the after ta# return of the
in!estment in the pre!ailing circumstances( ) a# alloances also ma+e a fiscal
regime more conduci!e and attracti!e for in!estment "y ta+ing cognisance of
in!estment costs and losses, thus encouraging the in!estor to ta+e more ris+s
especially in less e#plored regions and for marginal fields( )his is "ecause here
there is no incenti!e, there ill "e no attraction in e#ploring small fields'(
)a# alloances and other incenti!es are therefore, of particular importance to the
petroleum industry especially due to the inherent ris+s associated ith it(
6.1 T&P"S O% #$$O5#NC"S #ND INC"NTI."S
)he range of ta# alloances and other incenti!es !ary from country to country
depending on the go!ernment:s fiscal o"Cecti!es( 6oe!er the pre!alent ones
include the folloing in ta"le 8(
Ta(le 0
/ome regimes treat royalty as deducti"le e#pense for ta# purpose hile others
don:t "ut treating it as a deducti"le e#pense has the effect of mitigating its full
impact on firms( 6oe!er, the o!erall effect of the a"o!e alloances and
incenti!es on any &2 ill depend on ho much they can lessen a high ta# "urden
an d ensure early reco!ery of in!estment costs, and di!idends for shareholders(
/. NI-"RI#7s %ISC#$ R"-IM" %OR P"TRO$"UM
)here are to main types of fiscal regime e#isting in Nigeria today( )hese are the
Coint !entures (<Hs) and the production sharing contracts (3/0)( <oint operating
agreements go!ern the unincorporated Coint !entures "eteen the Nigerian national
petroleum corporation (NN30) and the MN10s( )a# assessment for the to fiscal
regimes is go!erned "y the 3etroleum profit ta# Act (33)A), cap 8=9 I as of the
federation of Nigeria (I&N) 1@@0, hich puts the ta# rate generally at 5=A(
3roduction from the Coint !entures accounts for nearly @7A85 of the 0ountry:s
crude oil production( )his analysis ill therefore centre on these to models(
/.1 T!" PRODUCTION S!#RIN- CONTR#CT
&ig( 1 Nigeria:s 3roduction /haring 0ontract
Under the 3/0, a non *refunda"le signature "onus is paya"le on the oil prospecting
licence (13I)( )he oil companies, fund the operations from e#ploration to
production and the profits are shared as agreed under a memorandum of
understanding (M1U) after deducting the company:s e#penses( )he contract area
is usually located in deep off shore or inland "asin and co!ers an area of not more
than 2,@=0+m( )he duration is 80 years including an e#ploration period of 10 years
hile relin-uishment is =0A( )he rental fee for 13I is F10;+mD any oil mining
lease (1MI) arising therefrom is F20;+m for 1st 10yrs and F1=;+m thereafter(
2oyalty "ased on the realisa"le price of the oil, is paya"le after alloances are
made for -uantity used for drilling, production or pumping operations, that inCected
or reformulated and reasona"le e!aporating losses( )he royalty rates under the
3/0s !ary depending on the area of the concession and are graduated on a sliding
scale depending not on production, "ut on ater depth as shon in ta"le 9(
3roduction costs are not deducti"le for purposes of calculating royalty(
Ta(le 6 Ro+alt+ Rates under the PSC
/.1.1 Sharing forula)
Royalty oil is allocated in +ind to the NN30 or the 6older, the proceeds of hich
shall "e e-ual to actual monthly royalty payment and annual rental fees in
accordance ith the 3/0 terms(

Cost oil is allocated to the 0ontractor in +ind to offset his operating costs( )a# oil
is allocated in +ind to the NN30 or the 6older and is to e-ual the amount of
monthly 33) lia"ility(
Profit oil, the "alance of oil after the a"o!e allocations is split "eteen NN30 and
the contractor in accordance ith the terms of the 3/0(
)he NN30 or the 6older is to pay all royalty, rental fees and 33)=1 from the
royalty and ta# oil(
/.2 T!" 3OINT ."NTUR"S
Under the <Hs, NN30 has ==A or+ing interest in the /hell <H and E0A in the
others( All operating costs are financed Cointly in the proportion of the e-uity
shareholdings, "y a system of monthly cash calls( 4ach of the <H partners can lift
and separately dispose of its share (proportional to the e-uity holdings) of crude oil
production su"Cect to the payment of royalty and ta#(
)he operator (usually the MN10) prepares and proposes programme of or+ and
"udget, hich is su"Cect to the appro!al of the maCor shareholder( 4ach party can
opt for and carry out sole ris+ operations( )he partner is e#empt from corporate
income ta# on its profit "ut su"Cect to ta#ation under the 33)A( )he right of the
parties ith respect to the concession, the assets, including the or+ing capital
used to de!elop the concession is defined "y the Coint operating agreement(
)he other o"ligations of the companies under the fiscal regimes include the
folloing, contri"ution to the 4ducation )rust &und (4)&) and ,ndustrial )raining
&und (,)&), payment of !alue added ta# (HA)) on goods and ser!ices ith the
e#ception of e#ports( 7i!idends are e#empted from ithholding ta#( )he
companies are to pay other ta#es, duties and le!ies imposed "y the different tiers of
go!ernment( )here are no domestic supply o"ligations( )he realisa"le mar+et
price is used for ta# assessment( 4#ploration o"ligations are contained in the
M1Us and relate to minimum or+ commitments and e#penditure for each phase
of the e#ploration period(
/.0 #$$O5#NC"S #ND INC"NTI."S IN T!" NI-"RI#N
P"TRO$"UM INDUSTR&
)o cushion some of the ta# "urden floing from the a"o!e arrangements the
folloing alloances and incenti!es ere pro!ided(
/.0.1 #llo,a(le Deductions
All alloa"le deductions are treated as charges against income and not as ta#
offsets and must "e e#penses holly, e#clusi!ely and necessarily incurred for
petroleum operations( )he categories are royalties, operating costs, tangi"le
e#penses and all intangi"le drilling costs( 4#penses incidental to petroleum
operations are also to "e treated as alloa"le deductions( Iosses occurring in any
accounting period are re-uired to "e carried forard(
/.0.2 Ca*ital #llo,ances
1utside the alloa"le deductions, capital alloances are granted annually for
-ualifying capital e#penditure at a depreciation rate of 20 A (first four years), 1@ A
( =th year) and 1A of the asset !alue is retained in the "oo+s until it is disposed off(
)he capital alloances are not alloed to reduce a company:s ta# lia"ility "elo
1=A*the remainder is carried forard indefinitely(
/.0.0 Petroleu in8estent tax allo,ance9In8estent tax credit
&urther -ualifying capital e#penditure is granted in respect of any asset used for the
purposes of petroleum operations in the year in hich the asset is first used, as
follos.
&or contracts other than 3/0s, and 3/0s e#ecuted after 1;7;@5, the -ualifying
capital e#penditure is to "e treated as ,n!estment )a# Alloance (3,)A)
deducti"le from the assessa"le profit( &or 3/0s e#ecuted "efore 1;7;@5, the
-ualifying capital e#penditure is to "e treated as an in!estment ta# credit
deducti"le from the ta# "ase(
)he M1Us contain fiscal sta"ility clauses and pro!ide for a guaranteed profit
margin of F2(=0 ""l( An offset is gran ted here the capital in!estment costs for
that year e#ceeds F8(=0 ""l( 1ther incenti!es include current e#pensing of
4#ploration J7e!elopment costs, limited head office o!erhead reco!ery,
e#emption of imports of e-uipment and capital goods from duties, graduated
sliding scale royalty, ring fence "y contract area( Ghy ha!e these alloances and
incenti!es "een una"le to promote in!estment in the industry to achie!e the o!erall
o"Cecti!e of %o!ernmentB
:. PROMOTIN- #ND SUST#ININ- IN."STM"NT
)he alloances and incenti!es ha!e "een una"le to promote and sustain in!estment
to the le!el desired "y go!ernment "ecause the fiscal regime and the alloances
and incenti!es neither encourage marginal in!estments nor ade-uately enhance the
present !alue terms of the i n!estor:s post ta# returns due to some inherent
constraints and limitations(
:.1 CONSTR#INTS #ND $IMIT#TIONS
)he 33) of 5=A e!en ithout other le!ies and ta#es is among the highest in the
orld( )he =0A rate under 3/0s is also on the high side( )he 1=A minimum ta#
lia"ility is a "ig "urden to a company that is yet to "rea+ e!en especially after
paying "onuses, royalties and other charges( )he 20A royalty for onshore fields is
also not in line ith glo"al trends(
)he distinction "eteen petroleum in!estment ta# alloance and in!estment ta#
credit is a disincenti!e to e#ploration and production for those under it (pre* 1;7;@5
3/0s) ho are denied the "enefits of an in!estment credit( A 3/0 that is su"Cect to
re!ie only to ensure that go!ernment:s ta+e goes up in line ith any price
increase a"o!e F2072 and does not ta+e care of the contractor:s ta+e in line ith
any fall in price ill not encourage potential in!estors especially during steady fall
in price( )his is "ecause "onuses, royalties and ta# "urden ill remain the same(
)he cost reco!ery limit and limited ring fence, act as disincenti!es to the
promotion of in!estment(
All these hen added up are enough to ma+e the alloances and incenti!es
unor+a"le especially as these are against glo"al trends in the industry(
:.2 -$O2#$ TR"NDS.
)he glo"al trend is to de*emphasise high ta# rate, tie ta# rate to additional profit or
impose lo "ut flat ta# on all acti!ities( A"u 7ha"i, 7u"ai, )unisia and Hene$uela
that ha!e similar high ta# rate do not share in production, hile Katar, 4gypt,
>emen and Argentina that share in production ha!e ta# rate ranging from 0*90A(
Most countries ha!e done aay ith royalty hile others ha!e rates ranging from
1 *12A, hich is "ased on the 2*factor or sliding scale tied to production(
:.0 T!" 5#& %OR5#RD.
As an impro!ement on the a"o!e models, Nigeria can adopt a flat ta# rate of 90A
and an additional profit ta# "ased on the company:s ,22( )his ill promote and
sustain in!estmentD and also pro!ide an incenti!e to pay more ta# that can "e used
to de!elop other sectors of the economy( %o!ernment:s interest "oth as resource
oner and ris+ ta+er (under <Hs) ill also "e satisfied( 2oyalty hen treated as a
ta# offset, deducti"le from assessa"le ta# ill mitigate its negati!e i mpact on
in!estment and also satisfy go!ernment:s -uest for early re!enue(

)he ta# regime should "e fle#i"le enough to accommodate any change affecting
the glo"al industry especially in the face of groing foreign ta# credit system( A
ta# holiday of = years for in!estors in marginal fields and frontier areas coupled
ith flo through shares ill encourage in!estment in small e#ploration
companies( A"sence of ring*fence or loss carry "ac+ard ill induce more
e#ploration acti!ities since the cost of digging a dry hole can "e offset against
disco!eries made( )o arrest gold plating that may arise from thisD the go!ernment
should impro!e its auditing and monitoring processes(
)he 2eser!e Addition ?onus (2A?) should "e re* introduced to increase reser!es
and enhance in!estors: post ta# returns( Ioss carry forard enhanced "y interest
has the capacity to increase e#ploration acti!ities especially in the deep offshore
and inland "asin( A rein!estment and local content o"ligation supported ith a ta#
credit ill also promote in!estment in the industry( 0rypto ta#es li+e "onuses
"eing front* loaded should "e reduced(
1ther issues li+e political ris+s, corruption, and state of infrastructure, rule of la
and security of oil industry personnel should also "e positi!ely addressed as
alloances cannot or+ in isolation(
)his is the only ay that ta# alloances can put Nigeria on the competiti!e edge
in attracting and promoting in!estment in its petroleum industry(
2I2$IO-R#P!&
/hell 3etroleum !s( &(?(,(2 L1@@EM 5 N(G(I(2
0ompanies ,ncome )a# Act 0ap E0 Ias of the &ederation of Nigeria (I&N)
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7eep 1ffshore and ,nland ?asin 3roduction /haring 0ontracts 7ecree No( @ of
1@@@(
7eep 1ffshore and ,nland ?asin 3roduction /haring 0ontracts 7ecree No(2E of
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4ducation )a# &und 7ecree No 7 of 1@@8(
,ndustrial )raining &und Act 0ap 152 Ias of the &ederation of Nigeria(
3etroleum Act 0ap 8=0 Ias of the &ederation of Nigeria (I&N) 1@@0(
3etroleum 3rofits )a# Act 0ap 8=9 Ias of the &ederation of Nigeria (I&N) 1@@0(
3etroleum )echnology 7e!elopment &und Act 0ap(8== Ias of the &ederation of
Nigeria (I&N) 1@@0