The Nigerian Government has declared that it will no longer apply value-added tax (VAT) on several energy products, including diesel, liquefied natural gas (LNG), compressed natural gas (CNG), electric vehicles, and cooking gas.
This move is aimed at lowering the prices of these essential energy products.
This announcement was made on Wednesday by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy.
Edun explained that these tax exemptions are part of the government’s efforts to help reduce the cost of living, improve energy security, and encourage a faster shift towards cleaner energy sources in Nigeria.
The government also revealed a new tax relief initiative for deep offshore oil and gas projects. This comes in the form of the “Notice of Tax Incentives for Deep Offshore Oil & Gas Production,” which is designed to offer more tax benefits for offshore projects.
A statement issued by the Federal Ministry of Finance noted that the VAT exemptions cover essential energy products and infrastructure like diesel, liquefied petroleum gas (LPG), CNG, LNG infrastructure, electric vehicles, and clean cooking equipment.
These measures are intended to help bring down the cost of living and support Nigeria’s transition to cleaner energy.
In addition, the new tax relief for offshore oil and gas projects is aimed at making Nigeria’s deep offshore regions more attractive to international investors.
The reforms are part of a larger set of policies championed by President Bola Ahmed Tinubu, which aims to promote sustainable growth and strengthen Nigeria’s position in global oil and gas markets.
New Withholding Tax Regulations Set for 2025
In another development, the Government has formalised the regulations on Withholding Tax (WHT) through official gazette, with plans to begin enforcement on January 1, 2025.
Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, shared this news via social media. He explained that the new regulations, which were gazetted on September 30, 2024, will allow for a 90-day grace period before implementation begins.
The regulations offer a reduction in WHT rates and provide full exemption for many businesses, especially small and medium-sized enterprises (SMEs) with annual revenue below N25 million.
Oyedele also highlighted that the Federal Inland Revenue Service (FIRS), with approval from the Finance Minister, has the option to allow early adoption of the regulations from July 1, 2024. This is intended to provide financial relief to businesses ahead of the official start date.
The WHT exemptions were initially approved by the government in July as part of broader tax reforms recommended by Oyedele’s committee. These reforms focus on easing tax burdens for small businesses, manufacturers, and farmers across the country.