BY CHIKA OKEKE, Abuja
President Bola Tinubu has endorsed an Executive Order on direct remittance of oil and gas revenue to the Federation account to curb wasteful spending and eliminate duplicative structures, while redirecting the resources for the benefit of Nigerians.
Tinubu signed the EO in pursuant of Section 5 of the Constitution of the Federal Republic of Nigeria (as amended).
The Executive Order is anchored on Section 44(3) of the Constitution, which vests ownership, control, and derivative rights in all minerals, oils, and natural gas in, under, and upon any land in Nigeria, including its territorial waters and Exclusive Economic Zone, in the Government of the Federation.
It seeks to restore the constitutional revenue entitlements of the Federal, State, and Local Governments, which were taken away in 2021 by the Petroleum Industry Act (PIA).
The PIA created structural and legal channels through which substantial Federation revenues were lost through deductions, sundry charges, and fees.
Under the current PIA framework, NNPC Limited retains 30 per cent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas derived from Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts.
In addition, the company retains 20 per cent of its profits to cover working capital and future investments.
Given the existing 20 percent retention, the additional 30 percent management fee is considered unjustified by the Federal Government, as the retained earnings are already sufficient to support the functions NNPCL performs under the contracts.
Also, NNPC Limited retains another 30 percent of its profit on oil and gas under the production sharing, profit sharing, and risk service contracts, as the Frontier Exploration Fund (FFF) under sections 9(4) and (5) of the PIA.
The FFF is devoted to speculative exploration, risks accumulating large idle cash balances, which would encourage inefficient exploration spending, at a time when government resources are urgently needed for core national priorities, including security, education, healthcare, and energy transition investments.
There is also the Midstream and Downstream Gas Infrastructure Fund (MDGIF) under Section 52(7)(d) PIA, funded by the collection of gas flaring penalties provided under Section 104.
The fund was set aside to support environmental remediation and relief for host communities impacted by gas flaring.
However, section 103 of the PIA has already established a dedicated Environmental Remediation Fund, administered by NUPRC, specifically designed to fund the rehabilitation of communities negatively impacted by upstream petroleum operations, including gas flaring.
Furthermore, Section 103 already imposes a fee on lessees to contribute to the fund and assist the communities.
All the deductions far exceeded global norms and effectively diverted more than two-thirds of potential remittances to the Federation Account. The continuing decline in net oil revenue inflows is largely attributable to the deductions and fragmented oversight under the current PIA architecture.
The Executive Order aims to resolve the duplicative 30 per cent deduction for Profit Sharing arrangements by addressing overlapping and redundant provisions across all relevant laws and regulatory instruments under the PIA framework and NNPC Limited’s governing structure.
Part of the objective is to eliminate unjustified multiple layers of deductions that erode revenues that ought to accrue to the Federation Account, enabling the three tiers of government to pursue critical national priorities.
Tinubu has identified structural concerns regarding the continued role of NNPC Limited as a concessionaire under Production Sharing Contract arrangements.
The existing framework, which allows the company to influence operating costs while simultaneously functioning as a commercial entity, creates potential competitive distortions and undermines its transition into a fully commercial operator as envisioned under the PIA.
While the Executive Order will introduce immediate measures to curb leakages, enhance transparency, eliminate duplicative structures, and reposition NNPC Limited strictly as a commercial enterprise, it will safeguard the Federation’s interests.
In rolling out the order, the President affirmed that the reforms are of urgent national importance, given their implications for national budgeting, debt sustainability, economic stability, and the overall wellbeing of Nigerians.
President Tinubu noted that his administration will also undertake a comprehensive review of the Petroleum Industry Act in consultation with relevant stakeholders to address identified fiscal and structural anomalies.
According to the Presidential Executive Order, which has been officially gazetted, NNPC Limited will no longer collect and manage the 30 percent Frontier Exploration Fund. NNPC Limited will ensure that the 30 percent profit from oil and gas from production sharing, profit sharing, and risk service contracts currently earmarked for the frontier exploration fund is henceforth transferred to the Federation Account.
NNPC Limited will no longer be entitled to the 30 percent management fee on profit for oil and gas revenues, which should go to the federation account.
In the same vein, all operators/contractors of oil and gas assets held under a production sharing contract shall, from the date of the Executive Order, which is February 13, 2026, pay Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and any other interest howsoever described which is due to the government of the federation directly to the Federation Account.
President Tinubu has also suspended payments of the Gas Flare Penalty into the Midstream and Downstream Gas Infrastructure Fund.
The Commission shall, from the date of the Executive Order, pay proceeds from all penalties imposed on operators for flaring gas into the Federation Account and cease payment of such proceeds into the Midstream and Downstream Gas Infrastructure Fund (MDGIF).
All expenditure from the MDGIF shall be conducted in line with extant public procurement laws, policies and regulations.
President Tinubu has approved the constitution of a joint project team to execute integrated petroleum operations. The Commission shall serve as the interface with licensees and lessees in respect of integrated operations where upstream and midstream petroleum operations are fully combined.
Tinubu also approved the establishment of an implementation committee to oversee and ensure the effective, coordinated implementation of the executive order.
Members of the committee include the Minister of Finance and Coordinating Minister of the Economy, Attorney-General of the Federation and Minister of Justice, Minister of Budget and National Planning, and Minister of State, Petroleum Resources (Oil).
Other members of the Committee are the Chairman, Nigeria Revenue Service; a representative of the Ministry of Justice; Special Adviser to the President on Energy; and Director-General, Budget Office of the Federation. The latter will provide a secretariat to the committee.
This was contained in a statement by the Special Adviser to the President on Information & Strategy, Bayo Onanuga on Wednesday in Abuja.
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