Federal Ministry of Finance

issues Circular on Fiscal

Incentives for the Presidential
Gas Growth Initiative
KPMG in Nigeria | Issue 2.3 | February 2024

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 3. Import and Customs Duty Exemption Applications:
stimulating and supporting the growth of the gas sector Importers of Compressed Natural Gas equipment
within the framework of the Presidential Gas Growth seeking exemption from import and customs duty are
Initiative. The highlights of the Circular are as follows: required to obtain a letter of support from the Office
of the Special Adviser to the President on Energy.
1. Import Duty Waiver: All items of equipment
imported relating to Compressed Natural Gas (CNG) 4. Import Duty and VAT Exemption for LPG:
and Liquefied Petroleum Gas (LPG) will now be at Importation of LPG under HS Codes 2711.12.00.00,
zero percent duty rate. 2711.13.00.00, and 2711.19.00.00 are exempt from
both Import Duty and Value-Added Tax.
 ero-rated Value Added Tax (VAT): The following
2. Z
items are subject to zero-rated VAT:  ithdrawal of Debit Notes: Debit Notes issued to
5. W
Petroleum Marketers, who imported LPG using codes
i. Feed Gas for all processed gas1. 2711.1.2.00.00 and 2711.13.00.00 from August 26,
ii. Compressed Natural Gas. 2019, to the present date, should be withdrawn by
the Nigeria Customs Service in line with the previous
iii. Imported Liquified Petroleum Gas2. approval.

iv. C
 ompressed Natural Gas (CNG) equipment
components, conversion, and installation 6. Extended Exemption List: An extended list of items
services. exempted from import duty and VAT, along with their
Common External Tariff (CET) Codes, is provided in
v. L
 iquefied Petroleum Gas (LPG) equipment the Circular’s appendix.
components, conversion, and installation services.
vi. A
 ll equipment and infrastructure related to the 7. Immediate Tariff Review Implementation: The
expansion of CNG, LPG, and the Presidential tariff review for the CNG and LPG sub-sector takes
CNG Initiative, including conversion kits. immediate effect from the date of this Circular, with
strict and prompt compliance expected.

1
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.
2
 he 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.
T

© 2024 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a
private English company limited by guarantee. All rights reserved.
 Commentary
We commend the Honourable Minister of Finance and we understand that the FHC’s decision is currently being
Coordinating Minister of the Economy for issuing the appealed at the Court of Appeal, and in view of this, the
Circular. The implementation of the Circular should help statutory power of the Minister to vary the Schedule to
in creating a friendly tax and business environment for the VAT Act may be seen to subsist until judgment is
companies operating in the gas sector. This will also play delivered.
a significant role in moderating inflation.
A related issue, which may arise, is the timing of the
However, while the Circular offers numerous benefits, commencement of the Circular. The VAT Act requires the
the legality of the instrument used to implement it Minister to exercise the power to amend its provisions
remains a major concern. The extent to which legislative by way of an order published in the Gazette. Thus, it is
powers can be delegated to other arms of government, imperative for the Circular to be published in the Gazette
particularly in relation to amendments, variations, and/or for it to properly take effect. We encourage the Minister
modifications of Acts enacted by the National Assembly, to ensure this step, made compulsory by the VAT Act, is
needs to be examined. undertaken to regularize the Circular.
The Circular rightly notes that Section 5 of the Customs, The requirement to obtain a letter of support from the
Excise Tariff, etc. (Consolidation) Act (CETA), CAP C49, Office of the Special Adviser to the President on Energy
LFN 2004 waives import duties ordinarily payable on before CNG equipment can enjoy the import duty
importation of gas equipment. Given that VAT is levied waiver may result in a bureaucratic barrier, potentially at
along with custom duties in practice, the Circular odds with the Principal Act. The enabling Act expressly
then links the import duty waiver to VAT exemption by provides for the waiver of custom duties on qualifying
leveraging the statutory powers of the Minister under equipment. There is, therefore, no need for any other
Section 38 of the VAT Act to exempt items from VAT, by requirement to slow down the process. It might be
an order published in the Gazette. beneficial for the Minister to re-visit this requirement
to ensure the Circular’s adherence with the law and
It should be noted that the legality of Section 38 of promote the ease of its implementation.
the VAT Act was challenged in the case between The
Registered Trustees of Hotel Owners and Managers Overall, the Circular and the inclusion of CET Codes in
Association of Lagos (“the Plaintiff”) and the the Circular for VAT-exempt items would provide clarity
Attorney-General of the Federation & Minister of to the tax authorities, importers, the Nigeria Customs
Finance (“the Defendants”), where the Federal High Service, and port authorities on the appropriate import
Court ruled that the Minister lacks the authority to duty and VAT treatment of the affected items and
revise or rewrite the laws of the Federation under the expedite their clearance at the ports of entry.
Constitution. Consequently, the Schedule to the Act,
being an integral part of the Act, cannot be amended Meanwhile, government may also consider extending
except through the same legislative process applicable to the exemption from VAT to crude oil imported or locally
the Act itself, that is, an amendment of such Act by the supplied to domestic refineries. This will go a long way
National Assembly. in managing inflation and reducing the cost of doing
business in the country.
Interpreting this decision in the context of the Circular
suggests that the Minister may not possess the
appropriate authority to independently exempt items
from VAT by revising the Schedule of the VAT Act which
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is an extant law of the Federation. This potentially raises a copy of the Circular.
a question on the legality of the Circular. Nonetheless,

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private English company limited by guarantee. All rights reserved.
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