Oil & Gas tax holiday: Nigeria to lose $21.9bn in 7 years

Nigeria is set to lose $21.9 billion in seven years over Federal government implementation of tax holiday for companies in the oil and gas. A tax holiday is a temporary reduction or elimination of taxes. It is associated with tax abatement and used as incentives for business investments.

Specifically, the combined effect of tax holiday and unlimited tax loss carry forward means that 2019 will be a calamitous year in which about $9.4 billion in taxes will be eligible to be deducted.

However, all the divested assets in 2014 and 2015 t5aht have been given 5 year tax holidays will not be eligible to pay taxes until 2023.

The multinational International Oil Corporations (IOCs) including Shell, Total, Eni and Chevron have been divesting their interests in Oil blocks and marginal fields for some time. Many of these assets are Nigerian onshore assets that have been plagued by industrial scale Oil theft, insecurity and spillages.

As at 2013, IOCs operating in the country had sold at least 300,000 bpd worth of equity in onshore and shallow water producing assets in the Niger Delta region all valued at over $5 billion.

According to analysts, since divestment began, there has not been significant reserves addition arising from divestment and acquisition activities.

This is not unexpected in the near term given that resource acquirers are focused on maximizing production in order to pay off their indebtedness. They believe that divestments result in Capital Flight and substantial revenue losses to the government.

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