“Why should a company get tax relief when Nigeria needs more revenue?”

It is a fair question.

Tax incentives mean the government is deliberately giving up some tax revenue, or changing the tax treatment of a particular activity, in the hope that the economic benefit created will be worth it.

Nigeria’s latest deep offshore oil and gas incentive is a good example.

In August 2026, President Bola Tinubu approved the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026. The government says the framework could unlock up to $50 billion in deep offshore investment, beginning with projects such as the approximately $10 billion Bonga South West development. 

So why would Nigeria offer tax incentives to oil companies?

Tax incentives are meant to change behaviour

A tax incentive is not supposed to be a gift simply because a company is large.

The basic idea is simpler:

Government gives up some potential tax revenue in exchange for an activity it wants to encourage.

That activity could be investment, production, job creation, infrastructure development, research, exports or development in a particular sector.

If a project is too expensive or risky under the normal tax rules, an incentive can change the economics enough to make the project worth pursuing.

That is the thinking behind Nigeria’s new deep offshore framework.

Deepwater oil projects require huge amounts of capital, take years to develop and carry significant technical and commercial risks. Nigeria has also struggled to move some major offshore projects from discovery to actual development. The new framework is intended to make the fiscal terms more predictable and competitive and reduce the need for individual project-by-project negotiations. 

What does Nigeria expect to get in return?

The government is not only looking at the tax revenue it might collect from the companies.

It is also looking at what happens because the investment takes place.

More investment can mean:

* More oil production

* More activity across the local supply chain

* Jobs and contracts for Nigerian businesses

* More demand for engineering, marine and technical services

* Foreign capital entering the economy

* More government revenue from economic activity generated around the projects

The government has said qualifying projects are expected to maximise execution within Nigeria where commercially and technically feasible, supporting local engineering, fabrication, marine logistics and other services. 

So the calculation is not simply:

Tax incentive = money lost by government.

The bigger question is:

What does Nigeria gain by making the investment happen?

But tax incentives have a cost

This is the part that often gets left out.

When government reduces or remits tax, there is a revenue forgone. That money could otherwise have gone towards public spending.

So an incentive only makes economic sense if the activity it creates produces enough wider value to justify what government gives up.

That is why the design of the incentive matters.

A poorly designed incentive can simply reduce tax revenue without producing enough additional investment or economic activity.

A well-designed one should be targeted, measurable and tied to a clear objective.

Nigeria is moving towards more targeted incentives

This is not happening only in deep offshore oil.

Nigeria’s broader tax reforms have been moving away from older incentive structures towards incentives that are more closely connected to investment and economic impact.

For example, the Pioneer Status Incentive was repealed from January 2026, with the Economic Development Tax Incentive (EDTI) taking its place. The Nigeria Investment Promotion Commission describes the new approach as one that links incentives to qualifying capital expenditure and the scale of investment rather than simply giving a time-based tax holiday to a qualifying industry. 

That tells us something about the direction of Nigeria’s tax policy.

The question is increasingly becoming:

“What are you investing in and what economic value will it create?”

rather than simply:

“Does your industry qualify for a tax holiday?”

Tax incentives are not the same as tax avoidance

There is also an important distinction here.

A company legitimately receiving a tax incentive provided for under Nigerian law is not the same as a taxpayer trying to hide income or manipulate transactions to avoid tax.

The first is tax policy.

The second can become tax avoidance or evasion, depending on what is being done.

Tax incentives are created by government precisely because government wants to influence economic behaviour through the tax system.

The real issue is whether the incentive is properly designed, properly administered and actually delivers the result it was created to achieve.

So, is Nigeria losing money by giving these incentives?

Not necessarily.

The government is making a trade-off.

It is accepting some reduction in potential tax revenue today in the hope of getting investment, production, jobs, foreign capital and future economic activity that may not happen under the ordinary tax regime.

Whether that trade-off is worthwhile will ultimately depend on what happens after the incentives are granted.

Did investment actually come?

Did production increase?

Did Nigerian businesses benefit?

Were jobs created?

Did the government eventually collect more revenue from the wider economic activity?

Those are the questions that should be used to judge a tax incentive.

Tax incentives are not automatically good or bad. Their value depends on what Nigeria gives up and what Nigeria gets in return.

For businesses and individuals, understanding this matters too. Tax rules are not only about how much tax you owe. They are also one of the tools government uses to influence where people invest, what businesses build and which economic activities it wants to encourage.