Recently, the Finance bill was signed into law, with its effective date on February 1st, 2020. Comparing its potential impact on diverse sectors, the bill is expected to significantly boost productivity in the Agric, SMEs, retail and Insurance sectors.
However, the bill may disincentivise investment in the Oil & Gas sector for a number of reasons. Notably, the bill amended the Petroleum Profit Tax (PPT) Act, deleting the exemption for dividends paid out of Upstream petroleum profits, thus subjecting
investors to 1 0% withholding tax. For companies involved in gas utilization, the finance bill removed the benefit of carrying forward capital allowance to post pioneer status periods, thus discouraging the unnecessary extension of pioneer status.
Though the amended laws are set to increase government revenue by blocking leakages, we note that the amendment may reduce the attractiveness of Nigeria as an investment destination for oil exploration and production. Again, Nigeria’s relatively higher PPT at 8 5.0% (excluding PSCs), compared to Angola’s 6 5.8% and Mozambique’s 3 2.0%, uncertainty in fiscal terms, following the amended Deep offshore PSC Act and non-passage of the Petroleum Industry Bill (PIB), remain key issues shielding investments.
United Capital Research