Nigeria’s President Bola Tinubu has signed a sweeping Executive Order mandating the direct remittance of oil and gas revenues to the Federation Account, in a move aimed at boosting government earnings, eliminating revenue leakages and restructuring key financial provisions under the Petroleum Industry Act (PIA).
The directive, issued pursuant to Section 5 of the 1999 Constitution (as amended), seeks to safeguard Nigeria’s oil and gas revenues, curb wasteful spending and dismantle duplicative structures within the sector. It is anchored on Section 44(3) of the Constitution, which vests ownership and control of all minerals, mineral oils and natural gas in the Government of the Federation.
According to the Presidency, the Executive Order is designed to restore the constitutional revenue entitlements of the Federal, State and Local Governments, which officials argue were significantly reduced under the framework of the PIA enacted in 2021.
Ending Multiple Deductions
Under the current PIA structure, NNPC Limited retains 30 percent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas derived from Production Sharing Contracts (PSCs), Profit Sharing Contracts and Risk Service Contracts. In addition, the company retains 20 percent of its profits for working capital and future investments.
The Federal Government considers the additional 30 percent management fee excessive, arguing that the 20 percent profit retention is sufficient to support NNPC Limited’s operational needs.
The Executive Order also halts NNPC Limited’s management of the 30 percent Frontier Exploration Fund, established under Sections 9(4) and (5) of the PIA. The fund, financed from profit oil and profit gas, was intended to support frontier basin exploration. However, the government has expressed concerns that such large allocations to speculative exploration could divert resources from pressing national priorities such as security, education, healthcare and energy transition initiatives.
Going forward, the 30 percent profit allocation previously earmarked for frontier exploration will be transferred directly to the Federation Account.
Direct Payments to Federation Account
Under the new order, NNPC Limited will no longer collect the 30 percent management fee on profit oil and profit gas revenues. All such proceeds are to be paid into the Federation Account.
Furthermore, all operators and contractors under production sharing contracts are required, effective February 13, 2026, to remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas and any other government entitlements directly to the Federation Account.
The President also suspended payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund (MDGIF). Instead, proceeds from gas flaring penalties will now be paid directly into the Federation Account. Any expenditure from the MDGIF must comply with existing public procurement laws and regulations.
Addressing Structural Concerns
The Presidency cited structural concerns regarding NNPC Limited’s dual role as concessionaire and commercial entity under Production Sharing Contracts, noting that the arrangement could create competitive distortions and undermine its transition into a fully commercial operator as envisioned by the PIA.
The Executive Order introduces immediate measures to enhance transparency, eliminate overlapping deductions and reposition NNPC Limited strictly as a commercial enterprise while protecting the Federation’s financial interests.
President Tinubu described the reforms as urgent, given their implications for national budgeting, debt sustainability and economic stability. He also announced plans for a comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address identified fiscal and structural anomalies.
Implementation Framework
To ensure effective execution, the President has approved the establishment of an implementation committee comprising key government officials, including the Minister of Finance and Coordinating Minister of the Economy, the Attorney-General of the Federation and Minister of Justice, the Minister of Budget and National Planning, and the Minister of State for Petroleum Resources (Oil).
Other members include the Chairman of the Nigeria Revenue Service, a representative of the Ministry of Justice, the Special Adviser to the President on Energy and the Director-General of the Budget Office of the Federation, who will serve as secretary to the committee.
Additionally, a joint project team has been constituted to coordinate integrated petroleum operations, with the Commission designated as the interface between regulators and licensees in combined upstream and midstream operations.
The Presidency maintains that the Executive Order marks a decisive step toward strengthening fiscal discipline in Nigeria’s oil and gas sector and ensuring that revenues are fully aligned with national development priorities.
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