Tinubu signs Executive Order mandating direct remittance of oil, gas revenues to Federation Account

Nike Popoola

President Bola Tinubu has issued an executive order to safeguard and enhance oil and gas revenues for the Federation, curb wasteful spending, eliminate duplicative structures in this critical sector of the national economy, and redirect resources for the benefit of the Nigerian people.

A statement from the Special Adviser to the President, (Information and Strategy), Bayo Onanuga, today said, the President signed the EO in pursuance 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, mineral 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.

The directive 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 are 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% retention, the additional 30% management fee is considered unjustified by the Federal Government, as the retained earnings are already sufficient to support the functions NNPCL performs under these contracts.

NNPC Limited also retains another 30% of its profit oil and profit gas under the production sharing, profit sharing, and risk service contracts, as the Frontier Exploration Fund under sections 9(4) and (5) of the PIA. A fund of this size, being 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 is to be used for supporting 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 this fund for precisely this purpose.
 
All these deductions far exceed global norms and effectively divert more than two-thirds of potential remittances to the Federation Account. The continuing decline in net oil revenue inflows is largely attributable to these deductions and fragmented oversight under the current PIA architecture.

The Executive Order aims to resolve, among others, 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. 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.

The President 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.

The Executive Order, therefore, introduces immediate measures to curb leakages, enhance transparency, eliminate duplicative structures, and reposition NNPC Limited strictly as a commercial enterprise, while safeguarding 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 well-being 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% Frontier Exploration Fund. NNPC Limited will ensure that the 30% 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% management fee on profit oil and profit 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.

President Tinubu approved the establishment of an implementation committee to oversee and ensure the effective, coordinated implementation of the executive order. The members of the committee include 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, Petroleum Resources (Oil). Other members of the Committee are the Chairman, Nigeria Revenue Service; a Representative of the Ministry of Justice; the Special Adviser to the President on Energy; and the Director-General, Budget Office of the Federation. The latter will provide a secretariat to the committee.