Tinubu orders direct remittance of oil revenues to Federation Account, strips NNPC of 30%

By Kazeem Ugbodaga

President Bola Tinubu has signed a sweeping Executive Order mandating the direct remittance of oil and gas revenues to the Federation Account, effectively dismantling layers of deductions under the Petroleum Industry Act (PIA) that have significantly reduced net inflows to federal, state and local governments.

The order, issued pursuant to Section 5 of the Constitution of the Federal Republic of Nigeria (as amended), is anchored on Section 44(3), which vests ownership and control of all minerals, mineral oils and natural gas in the Government of the Federation.

The directive seeks to restore constitutional revenue entitlements of the three tiers of government, which the Presidency said were eroded by structural and legal provisions introduced by the PIA in 2021.

Under the existing framework, NNPC Limited retains 30 per cent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas from Production Sharing Contracts, Profit Sharing Contracts and Risk Service Contracts. In addition, the company keeps 20 per cent of its profits for working capital and future investments.

The Federal Government described the additional 30 per cent management fee as unjustified, arguing that the existing 20 per cent retained earnings are sufficient to support NNPCL’s operational responsibilities.

NNPC Limited also retains another 30 per cent of profit oil and profit gas under the same contracts for the Frontier Exploration Fund, as provided in Sections 9(4) and (5) of the PIA.

The Presidency warned that such a large allocation to speculative exploration risks creating idle cash balances and inefficient spending at a time when government resources are urgently needed for security, education, healthcare and energy transition priorities.

In addition, the Executive Order addresses concerns around the Midstream and Downstream Gas Infrastructure Fund (MDGIF), funded through gas flaring penalties under Section 104 of the PIA.

The President suspended payments into the MDGIF, directing that all gas flare penalty proceeds be paid directly into the Federation Account.

“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,” the gazetted order states.

The order further stipulates that NNPC Limited will no longer collect and manage the 30 per cent Frontier Exploration Fund and will cease retaining the 30 per cent management fee on profit oil and profit gas revenues due to the Federation.

According to the Presidency, the combined deductions under the PIA framework effectively divert more than two-thirds of potential remittances away from the Federation Account, contributing to declining net oil revenue inflows and fragmented oversight.

The Executive Order also introduces structural reforms to reposition NNPC Limited strictly as a commercial enterprise, removing its dual role as concessionaire and commercial operator in Production Sharing Contracts, a framework the Presidency says creates potential competitive distortions.

President Tinubu described the reforms as urgently necessary in view of their implications for national budgeting, debt sustainability, economic stability and the overall well-being of Nigerians.

The President also announced a comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address identified fiscal and structural anomalies.

To ensure seamless implementation, Tinubu approved the constitution of an Implementation Committee comprising 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, the Minister of State for Petroleum Resources (Oil), 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 secretariat.