Nigeria has drawn over $1 billion in fresh investments into its oil and gas sector since President Bola Tinubu took office, according to Olu Verheijen, Special Adviser to the President on Energy. This revelation was made at the African Energy Week in Cape Town, South Africa, where Verheijen underscored the impact of new regulatory frameworks in attracting diverse investments across the oil and gas value chain.

Verheijen explained that this influx is only the beginning, with expectations of further investment commitments for deepwater exploration projects by mid-2025.

“We have unlocked over $1 billion in investments across the value chain, and by the middle of 2025, we expect to see Final Investment Decisions on two more projects, including a multibillion-dollar deepwater exploration project, which will be the first of its kind in Nigeria in over a decade – one of many to come,” she noted.

These anticipated deepwater projects, if realized, would mark a revival of high-stakes investments in Nigeria’s offshore oil fields, an area that has been largely dormant over the past decade.

Nigeria’s progress is rooted in its Petroleum Industry Act (PIA), which, after a twenty-year legislative delay, received Presidential assent in 2021. Verheijen explained that the current administration is leveraging this framework with an accelerated approach to establish Nigeria as a “leading global producer and exporter of energy.”

She outlined the government’s new strategy to expedite regulatory approvals, noting, “We are already seeing the fruit of our work. Regulatory approvals are being expedited, major investment decisions are being finalized across the value chain.”

The PIA has provided a legal structure for the oil and gas industry, aiming to enhance transparency, boost competitiveness, and create a more conducive environment for local and foreign investments. This law is further bolstered by President Tinubu’s reforms to streamline business processes in the sector, reduce bureaucratic delays, and enhance investor confidence.

The presidential adviser described the administration’s approach as one that “is not held back by the outdated approaches and assumptions of the past,” adding that Nigeria is “open, daring, and eager to leave a legacy that will stand the test of time.”

Key Reforms Under Tinubu’s Administration

Since taking office in May 2023, President Tinubu has introduced a series of reforms designed to reduce operational costs and timeframes, positioning Nigeria as a more attractive destination for oil and gas investments. In February 2024, the administration enacted three critical presidential directives aimed at creating tens of thousands of jobs, boosting foreign exchange, increasing tax revenue, and supporting the broader economy. These directives include:

• Tax Relief for Deep Offshore Oil Projects: New tax incentives were introduced specifically for deep offshore projects, which are high-cost but high-potential ventures, expected to encourage substantial foreign investment.
• VAT Exemptions on Key Energy Products: Value-added tax (VAT) exemptions were extended to include LPG, CNG, diesel, and other critical energy products. These exemptions, outlined in the VAT Modification Order 2024 and the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, aim to reduce costs for producers and end consumers.
• Enhanced Business Environment for Oil Operators: The administration has implemented measures to streamline business processes, making it easier for operators to navigate regulatory approvals, while ensuring compliance with environmental and economic standards.

The oil and gas sector remains the bedrock of Nigeria’s economy, being the largest source of foreign exchange and a major contributor to tax revenue. The government’s recent initiatives are anticipated to bolster macroeconomic stability and strengthen Nigeria’s overall economic resilience. The reforms are designed not only to attract investments but also to create a ripple effect that would stimulate job creation, elevate foreign exchange earnings, and increase tax revenues.

Verheijen expressed confidence in Nigeria’s path toward a diversified energy sector that balances fossil fuels and renewables.

“We see the abundant opportunities that lie ahead. We see a Nigeria that is a leading global producer and exporter of energy – whether it’s fossil fuels or renewables,” she said.

The next phase of Nigeria’s energy strategy will hinge on the successful implementation of these reforms, with deepwater project investments expected to play a central role. If the anticipated investments come to fruition, they will likely usher in a new era of offshore drilling activities and potentially elevate Nigeria’s standing within the global energy market.

Verheijen’s statement on anticipated multibillion-dollar investments by mid-2025 highlights the government’s ambition to rejuvenate Nigeria’s offshore fields, which hold significant untapped reserves.

The Central Bank of Nigeria (CBN) has authorized commercial, merchant, and non-interest banks in the country to manage tradeable foreign currencies deposited in domiciliary accounts established through the new Foreign Currency Disclosure, Deposit, Repatriation, and Investment Scheme.

This scheme, which comes into effect on November 6, 2024, will allow banks to trade with funds that remain uninvested in these accounts, provided they remain accessible to account holders upon request.

According to CBN’s recently released guidelines, banks must ensure that these deposits are readily available to participants when requested. The guidelines state, “CMNIBs [Commercial, Merchant, and Non-Interest Banks] may trade with any deposited ITFC [Investment Funds Transfer Certificate] not immediately invested by a participant, provided that the funds would be made available to the participant when needed.”

Additionally, the CBN mandates that participating banks must provide monthly returns on these accounts no later than the 14th of each month to enhance transparency and accountability. Specifically, the CBN requires that interest on uninvested funds be paid following the provisions outlined in the “Guide to Charges by Banks and Other Financial Institutions in Nigeria.”

The CBN noted, “Interest payment by CMNIBs on the balance in the designated domiciliary account shall be in line with relevant provisions of the Guide to Charges by Banks and Other Financial Institutions in Nigeria.”

Requirements for Reporting

The guidelines require banks involved in the scheme to render detailed monthly reports, including data on the number of scheme participants, the total value of ITFCs deposited, and the cumulative value for the financial year. The reports should also address notable trends or challenges during the reporting period, ensuring full transparency and enabling effective CBN oversight.

To further enforce accountability, banks must disclose financial transactions conducted under the scheme and specify the types of permissible instruments and sectors where these investments are made.

“Every CMNIB shall render monthly returns (in line with a template to be advised by the Banking Supervision Department) to the Bank on the operation of the Scheme not later than the 14th day of the following month,” the CBN directive stated.

The CBN also instructed banks to submit records of uninvested ITFCs, detailing any trades, investments, and loans funded from these unused funds. This measure is to ensure that all unallocated funds are fully accounted for, with a statement on the balance of uninvested ITFCs included in the returns. The CBN added that it may request additional information from banks to support its ongoing monitoring and evaluation of the scheme.

A New Voluntary Currency Disclosure Scheme

The CBN’s approval of the foreign currency management guidelines follows the recent launch of a nine-month window by the Federal Government for the Voluntary Currency Disclosure, Depositing, Repatriation, and Investment Scheme, known as the “Disclosure Scheme,” under Executive Order No. 15 of 2023. This initiative encourages Nigerians with foreign currency holdings to disclose and deposit these funds with local banks, bringing previously unreported assets into the formal banking system.

This voluntary disclosure scheme offers several incentives to encourage broad participation, including tax immunity, asset protection, confidentiality, interest on deposited funds, and flexible options for repatriating funds. The government is seeking to increase foreign currency inflows into the national economy, boost the financial system’s liquidity, and enhance Nigeria’s foreign exchange reserves, by creating a more favorable environment for holders of foreign assets.

This new directive marks another step by the CBN and the Federal Government to strengthen Nigeria’s foreign exchange reserves and integrate foreign-held assets into the national economy. The interest on deposits and the allowance for banks to trade with uninvested ITFCs is expected to provide liquidity for financial institutions, potentially stabilizing the forex market and supporting economic growth.

Moreover, these funds, once actively managed, are expected to offer a new income stream for banks, enhance capital for investments, and bolster the overall resilience of the financial sector.

However, analysts said the success of this program will largely depend on public trust in the scheme’s confidentiality and the appeal of incentives, such as tax immunity and repatriation flexibility, to attract domestic and foreign-based Nigerians holding undeclared foreign currency assets.

With the scheme set to launch in less than a month, the CBN and the Federal Government are optimistic that this initiative will encourage broader economic participation and help reduce reliance on informal channels for currency exchange.