By Michael Eboh

ANALYSTS at GTI Capital have  called for a review of Nigeria’s tax policy especially as it affects the country’s petroleum industry, saying that the current tax system does not allow for technological advancement in the industry.

The analysts in a report titled, ‘Nigeria Oil Sector Outlook,’ said that the current tax system failed to take into account individual features of oil production projects, such as geology, geographical location, expenditure on development, and limits implementation of new technologies.

They said: “The need to re-assess the tax system in order to provide more room for technological advancement in the industry and the country as a whole becomes more paramount.

“A possibility is the concept of the excess profit tax using the financial results of the company’s activities as the principal subject of taxation.”

The analysts maintained that setting the tax system aright will create new economic stimuli for implementation of oil production projects.

They said: “One notable effort under the proposed Petroleum Industry Bill is a proposition for a total repeal of the petroleum profit tax Act, Cap P. 13, 2004. The present petroleum profit tax will be replaced with the Nigerian Hydrocarbon Tax (NHT).

“Section 313 of the proposed bill provides that Nigerian Hydrocarbon Tax will be computed on the chargeable profits for the relevant accounting period at 50 per cent for onshore and shallow waters. The anticipation for the adoption of this bill into law is the optimism that it will bring about the much desired development in the sector.”

The analysts projected a positive outlook for the petroleum industry based on that the competitive landscape that will continue to remain appealing to operators and new market entrants.

They, however, emphasized the need for the government to place emphasis on diversification of the economy to reduce dependence on oil.

Continuing, they said: “Since new investments in the sector have been hampered by uncertainties around the PIB which was first initiated in 2008, the onus is on the government to palliate the growing disinterest of foreign investments.

“The PIB in itself will need to be adjusted to consider the changes in global economics on oil prices and investment costs that affected almost every 170 million persons over the last six months.

“Nigeria will need to join the long train of high-tech energy industry transition that has changed the business model of the sector and led to the possible development of a wide range of unconventional resources.

“Considering the success story of the shale gas revolution in the US with a significant growth in drilling activities over the last few years and the skills gap in this operation, Nigeria needs to stay competitive by evaluating our position in the industry.”