ASSESSMENT ON SECTORAL IMPACT OF NIGERIA’S TAX REFORMS: A CASE STUDY OF LISTED OIL & GAS FIRMS (2020–2025)

Background to the Study Taxation plays a pivotal role in the economic architecture of resource-rich nations, serving both as a revenue mobilization tool and a policy lever for sectoral regulation. In Nigeria, where oil and gas have long constituted the backbone of the economy—accounting for over 90% of foreign exchange earnings and about 60% of government revenue (CBN, 2022)—the interface between tax policy and the performance of the hydrocarbon sector is particularly consequential. Over the years, concerns about fiscal sustainability, dwindling oil revenues, and underwhelming sectoral contributions to GDP have prompted a series of tax reforms aimed at improving governance, attracting investment, and optimizing resource rents. These reforms, notably the Petroleum Industry Act (PIA) of 2021, were not merely fiscal adjustments but structural shifts intended to reshape the operational, financial, and regulatory dynamics of the industry (Okonjo-Iweala, 2021). The post-2020 reform era presents a defining phase in Nigeria’s fiscal evolution. The enactment of the PIA marked a culmination of two decades of policy deliberation. Its provisions, which include the replacement of old royalty regimes, the streamlining of petroleum taxes, and the creation of the Nigerian Upstream Regulatory Commission (NURC), are meant to enhance transparency and investor confidence. Equally significant are provisions for host community development and clearer delineation of fiscal terms between upstream, midstream, and downstream operations. These reforms have been situated within broader fiscal frameworks such as the Finance Acts (2019–2023), which introduced sector-wide changes including the tightening of transfer pricing rules and expansion of digital tax frameworks (FIRS, 2023). While these moves represent commendable policy ambition, they raise practical questions regarding the direct implications for firms operating in Nigeria’s oil and gas space. Listed oil and gas firms provide a unique lens through which to evaluate reform outcomes. These entities, governed by disclosure obligations and market accountability, reflect the financial health and strategic responses of the industry. Their investment patterns, profit margins, tax liabilities, and corporate restructuring decisions offer concrete indicators of how tax reforms translate into operational realities. Scholars like Adebisi and Gbegi (2022) argue that while tax reforms may be well-intentioned, their effectiveness depends on institutional readiness, clarity of legislation, and the economic environment in which firms operate. Others, such as Udoma (2023), caution that abrupt policy shifts without adequate transitional provisions could impose compliance burdens that erode firm profitability, especially in capital-intensive sectors like oil and gas. Moreover, the global energy landscape has been anything but static. The period between 2020 and 2025 has been marked by unprecedented volatility—ranging from pandemic-induced price shocks to accelerated shifts toward renewable energy. This external turbulence has amplified the internal pressures Nigerian oil and gas firms face, including regulatory compliance, community relations, and foreign exchange constraints. Tax reforms during this period were expected to buffer the industry against such volatility by creating a more stable and competitive fiscal environment. However, whether these expectations have materialized remains a contested issue. The need for empirical evidence that links tax policy to sector-specific firm outcomes—particularly in revenue generation, cost management, and investment behavior—is increasingly apparent. In light of these complexities, this study undertakes a critical assessment of how Nigeria’s recent tax reforms have affected listed oil and gas firms from 2020 to 2025. It seeks not only to evaluate financial metrics but also to understand how firms navigate evolving regulatory landscapes. The research adopts a sectoral lens, acknowledging that tax policy is not a one-size-fits-all instrument, and that sectoral context—especially in resource-dependent economies—matters profoundly. Through quantitative data analysis and policy review, the study contributes to ongoing discourse on tax justice, energy governance, and fiscal federalism in Nigeria. Statement of the Problem Despite the apparent sophistication of Nigeria’s tax reform agenda post-2020, the oil and gas sector continues to exhibit structural inefficiencies, fiscal leakages, and investment inertia. The passage of the Petroleum Industry Act (PIA), for instance, was expected to usher in a new era of fiscal clarity and operational efficiency. Yet, years into its implementation, the sector remains entangled in legacy issues—unclear transitional guidelines, overlapping regulatory jurisdictions, and inconsistent application of fiscal provisions (NEITI, 2023). While the PIA introduced differentiated tax regimes for oil and gas operations, it has also raised compliance complexities, particularly for firms straddling multiple value chain segments. This raises a critical concern: are the reforms truly reducing investor uncertainty and enhancing firm-level performance, or merely rearranging bureaucratic hurdles? Compounding the issue is the macroeconomic backdrop against which these reforms are unfolding. The oil and gas industry has had to contend with naira devaluation, rising inflation, and declining capital inflows—all of which distort cost structures and erode investment attractiveness. Listed firms, which are typically more exposed to global capital markets, face added pressure to maintain competitive returns while navigating a changing domestic tax landscape. Anecdotal evidence suggests that some firms have resorted to corporate restructuring, asset divestment, or conservative investment strategies in response to tax-related uncertainty (Olaniyi & Eze, 2022). The extent to which tax reforms have influenced these strategic shifts, however, remains underexplored in empirical literature. Furthermore, the prevailing assumption that tax reforms automatically stimulate productivity and compliance may not hold uniformly across sectors. In a study by Hassan and Bello (2021), it was observed that while reforms improved revenue administration, their impact on corporate tax morale and operational performance was limited in capital-intensive sectors. For oil and gas firms, which already grapple with high production costs and regulatory burdens, any added fiscal pressure—even if reform-driven—could lead to unintended disincentives. Without granular, sector-specific analysis, policy interventions risk being either too generic or misaligned with the industry's operational realities. There is, therefore, a pressing need for research that critically assesses how tax reforms between 2020 and 2025 have affected Nigeria’s oil and gas firms, particularly those listed on the stock exchange. This study addresses that gap by examining empirical data on financial performance, tax expenditures, and investment trends, with a view to understanding whether recent fiscal changes have achieved their intended outcomes. Beyond the policy rhetoric, it is essential to evaluate whether these reforms have translated into tangible gains for sectoral development, competitiveness, and long-term fiscal sustainability. 1.3 Objectives of the Study The main objective of this study is to assess the sectoral impact of Nigeria’s tax reforms on the operational and financial performance of listed oil and gas firms between 2020 and 2025. The specific objectives are to: 1. Examine the effect of recent tax reforms on the profitability of listed oil and gas firms in Nigeria. 2. Investigate the influence of tax compliance costs on investment decisions within the oil and gas sector. 3. Evaluate how tax incentives under current reforms affect capacity utilization and operational efficiency. 4. Determine the extent to which regulatory clarity and fiscal stability influence long-term planning among listed oil and gas firms 1.4 Research Questions To achieve the stated objectives, the study seeks to answer the following research questions: 1. What impact have recent tax reforms had on the profitability of listed oil and gas firms in Nigeria? 2. How do tax compliance costs affect investment decisions in Nigeria’s oil and gas sector? 3. In what ways have tax incentives influenced capacity utilization and operational efficiency in listed firms? 4. To what extent does fiscal stability under new reforms shape long-term strategic planning by oil and gas firms? 1.5 Research Hypotheses The study proposes the following null hypotheses to guide empirical testing: H₀₁: Tax reforms implemented between 2020 and 2025 have no significant effect on the profitability of listed oil and gas firms in Nigeria. H₀₂: Tax compliance costs do not significantly influence investment decisions within the oil and gas sector. 1.6 Significance of the Study This study is significant in informing tax policy formulation and sectoral governance in Nigeria. By providing evidence on how reforms like the Petroleum Industry Act and recent Finance Acts have impacted listed oil and gas firms, the research aids policymakers in refining tax regimes to better balance revenue goals with sectoral sustainability. The findings will be crucial for agencies such as the Federal Inland Revenue Service (FIRS), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and the Ministry of Finance in assessing reform effectiveness and institutional alignment. For oil and gas firms, especially those publicly listed, the study serves as a performance benchmark and strategic planning resource. Understanding how tax reforms influence profitability, cost structures, and compliance obligations will enable firms to make informed investment and operational decisions. This knowledge is particularly relevant amid sectoral pressures, including energy transition policies and fluctuating global oil prices. From an academic and empirical standpoint, the study contributes to a relatively underexplored area of Nigerian fiscal research. While macroeconomic studies on tax reform are abundant, few have engaged sector-specific analysis using longitudinal firm-level data. This research thus offers a nuanced empirical lens, advancing scholarly discourse on tax policy effectiveness in developing, resource-dependent economies. 1.7 Scope of the Study The scope of this study is restricted to evaluating the effects of Nigeria’s tax reforms between 2020 and 2025 on the financial and operational performance of oil and gas firms listed on the Nigerian Exchange Group. The key variables under consideration include tax reforms (independent variable), profitability, investment decisions, tax compliance costs, and capacity utilization (dependent variables). The research will utilize a combination of descriptive and inferential statistics to analyze secondary financial data obtained from annual reports, industry databases, and regulatory publications. Geographically, the study focuses on Nigeria, with a specific emphasis on listed oil and gas firms, such as Seplat Energy, TotalEnergies Nigeria, and Oando Plc. These firms are selected due to their transparency in reporting, sectoral relevance, and accessibility of data. The population includes all oil and gas firms listed on the NGX during the study period, and the sample will be purposively drawn based on consistency in listing and availability of reform-related financial disclosures. 1.8 Operational Definition of Terms Tax Reforms: Legislative and administrative changes to Nigeria’s tax structure, including laws like the Petroleum Industry Act (2021) and Finance Acts, aimed at improving revenue generation and sectoral efficiency. Profitability: A financial metric that indicates the net earnings of a firm, often measured by return on equity (ROE) or profit after tax (PAT), which this study uses to evaluate the financial impact of tax reforms. Tax Compliance Cost: The direct and indirect costs incurred by firms in meeting tax obligations, such as record-keeping, legal consulting, audits, and reporting requirements under new fiscal policies. Investment Decisions: Strategic choices made by firms concerning capital allocation, asset acquisition, and expansion—decisions often influenced by the prevailing tax environment. Capacity Utilization: The extent to which a firm uses its installed production capacity, serving as an indicator of operational efficiency, which this study examines in light of available tax incentives. Listed Oil and Gas Firms: Publicly quoted companies in Nigeria’s oil and gas sector whose shares are traded on the Nigerian Exchange Group, and which are subject to both corporate and sector-specific tax regulations.