The Commission, in consultation with industry stakeholders, is tasked, on an annual basis, with conducting annual benchmarking studies to establish:

1. Unit Operating Cost (UOC) targets for onshore, shallow water, and
   deep offshore terrains.
2. Cost reduction targets customised to each operator’s terrain and
   production characteristics.
3. Annual assessments within the tax return cycle to evaluate
   performance against targets.
   

The Commission will forward the list of qualified companies eligible
for the CEI to the Federal Inland Revenue Service (FIRS), and this will
serve as a guide to validate taxpayers’ claim to the incentives

Lessees, Licenses and Contractors, whose actual cost in a financial year are below the set cost reduction targets, are entitled to tax credits based on a share of the incremental government take saved through cost efficiency. 

These tax credits will be applied against the overall tax liability of the Lessees’, Licenses’, or Contractors’ relevant asset, designed to reward companies for cost reductions without compromising existing government revenue expectations. It is important to note that these incentives are non-transferrable beyond 31 May 2035. Unless extended or renewed by the President, any unutilised tax credits by this expiration date will become invalid.

The formula for computing the CEI is as follows: 

CEI = (TOC-AOC) * V * RTR * 50%

Where:

CS is Cost Savings = (TOC – AOC) 
RTR is Referenced Tax Rate
AOC is Actual Operating CostsTOC is Target Operating Cost
V is Annual Fiscal sales of Hydrocarbons
50% is the maximum allowable proportion of CEI from cost savings

It is important to note that CS must be a positive integer to qualify for the incentive. The tax credits must be linked to legitimate, sustainable efficiencies and not derived from unfair practices or prejudicial dealings

The Order took effect on 30 April 2025, with implementation guidelines expected within 30 days, and benchmarking matrices to be published within 90 days of the start of each calendar year. This incentive scheme remains in force until 31 May 2035, unless extended.