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Nigeria’s leading indigenous energy companies, Aradel Holdings and Seplat Energy, delivered robust earnings in the first half of 2026, but a substantial portion of their profits was absorbed by tax obligations, underscoring the growing fiscal burden facing operators in the country’s oil and gas sector.
Combined, the two companies generated approximately N1.54 trillion in pre-tax profit during the six-month period. However, total income tax expenses amounted to about N1.13 trillion, representing roughly 73 per cent of their combined pre-tax earnings.
The figures highlight how rising profitability in Nigeria’s upstream petroleum industry is being matched by significantly higher tax liabilities following improved production, stronger revenues and the implementation of the country’s revised fiscal framework.
Aradel’s Tax Bill Nearly Matches Pre-Tax Profit
Among the two companies, Aradel Holdings recorded one of the most striking tax positions.
The company posted a pre-tax profit of N752.7 billion for the first half of 2026, but incurred a current tax charge of N748.1 billion, equivalent to approximately 99.4 per cent of its pre-tax earnings.
Although deferred tax adjustments reduced the total tax expense recognised in the company’s financial statements, the scale of the current tax obligation illustrates the significant impact of statutory taxes on its profitability.
Aradel’s strong financial performance was driven largely by increased crude oil production and sales following the expansion of its upstream operations. Revenue climbed sharply during the period, supported by export sales, higher production volumes and contributions from gas and refined petroleum products.
Seplat Also Faces Heavy Tax Burden
Seplat Energy reported a similar trend, although with a comparatively lower effective tax burden.
The company generated N790.4 billion (approximately $574.9 million) in pre-tax profit during the first half of the year. Its current tax charge stood at $475.6 million, representing about 82.7 per cent of pre-tax earnings.
Using an exchange rate of roughly N1,377 per dollar, the current tax liability translates to approximately N654.8 billion. After accounting for deferred tax adjustments, Seplat’s total tax expense was estimated at N564.9 billion.
Despite the sizeable tax obligation, Seplat delivered strong operational performance, supported by improved production, favourable commodity prices, lower finance costs and higher revenues. The company also declared a record quarterly dividend of US$0.12 per share following its half-year results.
Fiscal Reforms Reshape Industry Economics
The sharp increase in tax payments reflects the evolving fiscal environment introduced under the Petroleum Industry Act (PIA), which revised Nigeria’s tax structure for upstream oil and gas operators.
Companies now face a combination of hydrocarbon tax, companies income tax and royalties, alongside other statutory obligations tied to production and profitability. As production expands and earnings improve, tax contributions have also risen significantly.
Industry analysts note that while the reforms are helping government revenues, they also reduce the proportion of earnings ultimately available to shareholders after tax.
Balancing Investor Returns and Government Revenue
The results illustrate the delicate balance between maintaining an attractive investment climate and ensuring the government receives adequate revenue from the country’s natural resources.
Although both Aradel and Seplat remain profitable and continue to reward investors through dividends and expansion projects, the scale of their tax obligations demonstrates the increasing role of Nigeria’s oil producers in supporting public finances.
With global energy prices remaining relatively supportive and domestic production improving, indigenous producers are expected to continue generating strong earnings. However, future profitability will increasingly depend not only on operational efficiency and production growth but also on how companies manage the growing fiscal demands associated with operating in Nigeria’s upstream petroleum sector.
