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Introduction to Oil and Gas in Nigeria

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Awolowo Legal > Obafemi Awolowo and Co. Blog  > Introduction to Oil and Gas in Nigeria

Introduction to Oil and Gas in Nigeria

The Oil and Gas sector serves as a major source of revenue in Nigeria. Any person intending to start an oil and gas business in Nigeria must comply with certain legal requirements. This write-up will give a breakdown of the step-by-step procedure necessary to set up an oil and gas business in Nigeria.

The following steps must be followed to start an oil and gas company in Nigeria:

Registration of Company (C.A.C)

This applies to all businesses owned by nationals, foreigners or both. The Companies and Allied Matters requires all businesses to be registered with the Corporate Affairs Commission (CAC). The process is seamless and carried out online by accredited agents of the CAC. This enables the business to acquire a separate legal entity through which it can sue and be sued and acquire a property. The documents given to the company upon registration ensure legitimacy and builds trust among its customers. They also serve as primary documents requested for during contracts or when opening a bank account. One could also register as an enterprise (business name). However, this would limit the type of permit it can be granted to carry out certain activities in the oil and gas sector.

Registration at National Investment Promotion Commission

This is only required for businesses having foreign participation. Every company with foreign ownership is required by the National Investment Promotion Commission Act to register with the NIPC before commencing business in Nigeria upon incorporation at the CAC.

Tax Registration & Obtaining Tax Clearance Certificate (TCC)

It is pertinent for a company intending to engage in the oil and gas business to register with the nearest branch of the Federal Inland Revenue Service (FIRS) and obtain a Tax Clearance Certificate (TCC). The Tax Clearance Certificate simply proves that the Company’s tax affairs for the preceding year are in order with no outstanding unpaid taxes. One of the benefits of having a TCC is that it is an important requirement to process any permit in the oil and gas industry.

Registration with the Nigerian Social Insurance Trust Fund (NSITF)

This scheme was established to cater to employee’s welfare. It protects private-sector employees from financial difficulties in the event of old age, invalidity, cessation of employment, and death which is paid to them or their survivors. Being a requirement for obtaining a license to operate in the petroleum sector in Nigeria, entities engaged in this business must register with NSITF and make monthly contributions towards the pension or retirement benefits and compensation for other work-related accidents

Obtain a Permit/License from Department of Petroleum Resources Permit

This is a department under the Ministry of Petroleum Resources (DPR) charged with the responsibility to provide regulatory guidelines across the entire oil and gas value chain in Nigeria. Application for all licenses in the oil and gas sector is sought for and obtained before any person or entity can carry out any operations therein. The DPR issues 3 categories of permits in the Oil & Gas Industry (OGISP) section depending on the service the company intends to provide. The categories of licenses are General, Major and Specialized purpose. The documents required to process the permits include incorporation/registration documents given at the point of Incorporation Documents, Tax Clearance Certificate, Employee Compensation Scheme (NSITF), List of Equipment available to the Company, Details of Staff, Evidence of Medical Retainership with a hospital, Company’s Profile etc.

The documents and the fee charged differ for each category of license sought for.

Register with Nigerian Content Development and Monitoring Board (NCDMB)

The NCDMB was established in 2010 by the Nigerian Oil and Gas Industry Development Act. Registration for the Nigerian Oil and Gas Industry Content Joint Qualification System is imperative as it consolidates data on all major activities in the Nigerian Oil and Gas Industry. The Board monitors the oil and gas sector to ensure compliance with Nigerian Content provisions and among others targets capacity-building interventions that will deepen indigenous capabilities.

Obtain the Industrial Training Fund Certificate

The ITF requires employers with a minimum of N50, 000, 000 (Fifty Million Naira) turnover or having more than 5 employees to contribute to the fund at the rate of 1% of the company employees’ payroll. Suppliers, contractors or consultants who bid for contracts from government agencies or private companies are required to make this contribution as well. Thus, a company intending to provide a service in the oil and gas sector must obtain this certificate to evidence its contribution to the fun, which is utilized to promote and encourage the acquisition of skills in industry and commerce with a view of generating a pool of indigenous trained manpower sufficient to meet the growing needs of the economy.

Registration for Pension

The pension registration can be done with any Pension Fund Administrators (PFA) in Nigeria. Although it is not compulsory unless the company intends to register with the Nigerian Petroleum Exchange or has more than 5 employees. However, it is advisable company register their staff, to enable them to save for pensions.

Register with Nigerian Petroleum Exchange and Production Companies

This step is not compulsory but advisable if the company intends to participate in bidding platforms for major contracts. This can be avoided if the company only engages in minor contracts.

Register with Production Companies

This is paramount to access the petroleum products intended to be sold and work with the major oil-producing companies, especially the International Oil Companies (IOC). The production companies include Total, Shell, etc.

Finally, there are various business opportunities in the oil and gas sector that one can engage in, depending on one’s capital or expertise. Regardless, to engage in any oil and gas activities in Nigeria, it is advisable to register an entity first, and when a company has been registered, it is mandatory to obtain appropriate licensing from the DPR and any other relevant regulatory agencies.