Are Nigerias investment and fiscal incentives sufficiently attractive?
The fact that several new entrants are coming into the industry irrespective of the popular perception of the countrys risks, suggests that the incentives are good enough. Although Nigerias petroleum profit tax (PPT) is 85 per cent and royalty is 20 per cent (on-shore), joint venture partners, courtesy of the oil crisis of 1986, enjoy a substantial rebate in the form of reduced government take based on a memorandum of understanding (MOU). Operators obtain a minimum guaranteed notional margin once they kept technical cost within a certain range. The rebate increases with additional investment beyond a specified level. The uniquely Nigerian system has worked well. However, many new discoveries will be produced under production sharing contracts (PSC), where the rules different from the joint venture. PSCs executed from July 1998 benefit from a flat 50 per cent tax allowance for qualifying expenditure for the accounting period in which the asset is first used. New PSC under the Year 2000
