The Federal Government has announced the removal of value-added tax (VAT) on several energy products, including diesel, Liquefied Natural Gas (LNG), Compressed Natural Gas (CNG), and electric vehicles, in a bid to reduce prices for consumers.
This decision was revealed in a statement by the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, on Wednesday. According to Edun, these measures are intended to alleviate the cost of living, strengthen energy security, and accelerate Nigeria’s transition to cleaner energy sources.
The VAT Modification Order 2024 introduces exemptions for a variety of essential energy products and infrastructure, such as diesel, feed gas, Liquefied Petroleum Gas (LPG), CNG, electric vehicles, LNG infrastructure, and clean cooking equipment. The statement emphasized that these initiatives are designed to lower living costs while promoting a shift towards more sustainable energy solutions.
In addition to these VAT exemptions, Edun announced new tax incentives for deep offshore oil operations and gas production through the Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024. He explained that this initiative aims to position Nigeria’s deep offshore basin as a prime destination for global investments in oil and gas.
These reforms are part of a comprehensive set of investment-focused policy initiatives led by President Bola Ahmed Tinubu, aligning with Policy Directives 40-42. The Notice of Tax Incentives for Deep Offshore Oil & Gas Production will provide tax reliefs for deep offshore projects to enhance Nigeria’s global competitiveness in the oil and gas sector.
It is important to note that these tax reforms follow President Tinubu’s establishment of a tax and fiscal policy committee in August 2023, chaired by tax expert Taiwo Oyedele. This committee is tasked with creating a new tax framework aimed at stimulating economic growth across the country. As part of its objectives, the committee has proposed various reforms, including increasing VAT and offering tax exemptions for low-income earners.
