Nigeria's Petroleum Industry Act 2021 (PIA) was signed into law by President Muhammadu Buhari on 16 August 2021, which provides for the introduction of a new framework for the oil and gas industry. The President also approved a steering committee for the implementation of the PIA on 18 August with a 12-month duration for the assignment.

Among other things, the PIA contains a new tax regime, including the repeal of the Petroleum Profit Tax Act and the introduction of a new Hydrocarbon Tax (HT) for upstream operations. The HT applies to crude oil, field condensates, and natural gas liquids produced from associated gas. It does not apply to associated and non-associated natural gas, or frontier acreage.

The HT rate is 15% for new onshore and shallow water acreage granted post-PIA and for licenses/leases converted into the new Petroleum Prospecting License (PPL) under the PIA. Otherwise, the HT rate is generally 30%, although no rate is set for deep offshore operations (i.e., exempt). Under the new regime companies involved in upstream, midstream, and downstream petroleum operations are also subject to corporate income tax (standard 30%), with specific rules for the industry.

The new tax regime generally applies with immediate effect for new licenses/leases issued under the PIA and for existing oil prospecting and oil mining licenses that are converted to the new licenses or are renewed. Holders of existing licenses are not required to convert, however, and continue to be taxed under the Petroleum Profit Tax Act until the license expires.

In addition to the above, the PIA also provides new production royalty rates. The rates are calculated on a field basis on the chargeable volume of the crude oil and condensates produced from the field area in the relevant month and, in certain areas, depend on the barrels per day (BPD) produced:

• Onshore areas:
  • monthly production not exceeding 5,000 BPD - 5.0%
  • monthly production between 5,000 and 10,000 BPD - 7.5%
  • monthly production exceeding 10,000 BPD - 15.0%
• Shallow water (up to 200m water depth):
  • monthly production not exceeding 5,000 BPD - 5.0%
  • monthly production between 5,000 and 10,000 BPD - 7.5%
  • monthly production exceeding 10,000 BPD - 12.5%
• Deep offshore (greater than 200m water depth):
  • monthly production not exceeding 50,000 BPD - 5.0%
  • monthly production exceeding 50,000 BPD - 7.5%
• Frontier - 7.5%

For natural gas and natural gas liquids, the general royalty rate is 5.0% on the chargeable volume, with the rate reduced to 2.5% for gas produced and utilized in-country.

In addition to the production royalties, an additional royalty is payable when the price per barrel of oil exceeds USD 50 per barrel, with the rate set at 0% if less than USD 50 per barrel, 5% if USD 100 per barrel, and 10% if greater than USD 150 per barrel, which is to be applied in a linear fashion, e.g., 2.5% royalty rate if the price is USD 75 per barrel. This additional price-based royalty does not apply for frontier acreage.