The Federal Ministry of Finance, through the Office of the Honorable Minister of Finance and Coordinating Minister of the Economy (‘the Minister’), recently released a Circular titled the “Fiscal Incentives for the Presidential Gas Growth Initiative” (hereafter referred to as “the Circular”).
The overarching goal of the initiative is to create a conducive environment for increased investment in the gas sector and increased supply and utilization of gas, thereby contributing to the nation’s economic development. This is in line with the Federal Government’s stated commitment to improving the investment climate in Nigeria.
The Circular is deemed to have taken effect from the date of issuance.
Highlights of the Circular
The Circular delineates key fiscal incentives aimed at stimulating and supporting the growth of the gas sector within the framework of the Presidential Gas Growth Initiative. The highlights of the Circular are as follows:
- Import Duty Waiver: All items of equipment imported relating to Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) will now be at zero percent duty rate.
- Zero-rated Value Added Tax (VAT): The following items are subject to zero-rated VAT:
- Feed Gas for all processed gas1.
- Compressed Natural Gas.
- Imported Liquified Petroleum Gas2.
- Compressed Natural Gas (CNG) equipment components, conversion, and installation services.
- Liquefied Petroleum Gas (LPG) equipment components, conversion, and installation services.
- All equipment and infrastructure related to the expansion of CNG, LPG, and the Presidential CNG Initiative, including conversion kits.
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- Prior to now, only gas supplied to electricity generating companies was exempt from VAT. This new policy has now extended the exemption to the raw gas that enters any processing gas plant.
- The Value Added Tax (VAT) Act (Modification) Order 2021 currently exempts locally produced LPG from VAT. With the policy change, LPG, whether imported or locally produced is now exempt from VAT.
