Shifting the Balance: Fiscal Attractiveness of Nigeria's Petroleum Regimes Before and After the Petroleum Industry Act

Abstract

This study examines the fiscal appeal of Nigeria's oil and gas sector, specifically focusing on its fiscal frameworks before and after the 2021 Petroleum Industry Act (PIA). This study investigates changes in government revenue, contractor internal rate of return (IRR), project net present value (NPV), and payback periods across different development models and oil price forecasts. Using scenario-based fiscal modeling, and assuming a base oil price of US$60 per barrel, the analysis examines onshore and shallow-water projects under Joint Venture (JV) arrangements and deepwater developments under Production Sharing Contracts (PSCs). The findings indicate that the PIA redistributes fiscal results, enhancing contractor returns while simultaneously preserving significant government revenue. Government take declines across all asset classes, from about 95% to roughly 87% in onshore and shallow water projects and from about 83% to around 73% in deepwater developments, accompanied by corresponding increases in contractor share. Investment performance improves across all terrains, with contractor IRR rising to about 21-23% across asset classes, alongside a higher contractor NPV at a 10 percent discount rate. Payback period varies depending on the asset type. In deepwater developments, capital recovery speeds up a little, takes a little longer in shallow-water assets, and stays about the same in onshore projects, despite better IRR and NPV outcomes. Sensitivity analysis results indicate that, within the US$40 to US$100 oil price per barrel range, post-PIA investment performance remains robust regardless of market conditions, while financial benefits moderate at higher price levels. These modeled improvements are increasingly reflected in observable upstream investment responses following the PIA, including renewed final investment decisions for major deepwater and gas projects, rising drilling activity, expanded seismic acquisition, and increased regulatory approvals for field development plans. Comparative fiscal benchmarking reveals that Nigeria's post-PIA deepwater government take of roughly 73% is consistent with the rates seen in other major offshore oil-producing regions globally. By integrating fiscal modelling, oil price sensitivity, observable investment responses, and cross-national fiscal comparisons, the study provides empirical evidence on how comprehensive petroleum fiscal reform can reshape investment incentives and fiscal competitiveness in resource-dependent economies.