Effect of Petroleum Business Arrangements and Tax Instruments on Investment Climate of Marginal Oil Fields in Nigeria

This study examines the effect of petroleum business arrangements and tax instruments on the investment climate of Marginal Oil Fields (MOFs) in Nigeria via a quantitative approach using PLS-SEM to analyse data collected from key stakeholders, including government officials, industry players and practitioners involved in MOFs. The petroleum business arrangements, attractiveness of petroleum fiscal regimes, tax incentives and types of profit-based taxes were investigated in relation to investment climate of marginal oil fields. The findings reveal that petroleum business arrangements and tax incentives have a significant positive effect on the investment climate of MOFs. Attractiveness of petroleum fiscal regimes showed the strongest influence, while types of profit-based taxes had no significant impact. The model’s R-squared value was 0.57, indicating a good level of explanatory power. The study contributes to the literature by filling geographical and methodological gaps and offers practical insights for policymakers to improve investment conditions in Nigeria’s marginal oil fields. The study concludes that fiscal policies and petroleum business arrangements play critical roles in enhancing investment in Nigeria’s MOFs and recommends targeted tax incentives like reduced royalty rate, distinct tax regime and favourable business terms such as stabilisation clauses and reduced bureaucratic hurdles to attract investment.