President Bola Tinubu has signed an Executive Order aimed at protecting and boosting oil and gas revenues accruing to the Federation, cutting down wasteful expenditures, removing overlapping structures within the sector, and channeling more resources toward national development.
In a statement issued by presidential spokesperson Bayo Onanuga, it was disclosed that the President exercised his powers under Section 5 of the Constitution of the Federal Republic of Nigeria, as amended, to enact the order.
The Executive Order draws authority from Section 44(3) of the Constitution, which confers ownership, control, and derivative rights over all minerals, mineral oils, and natural gas located in, under, or upon any land in Nigeria, including territorial waters and the Exclusive Economic Zone, on the Federal Government.
The directive is designed to reinstate the constitutional revenue rights of the federal, state, and local governments that were altered by the enactment of the Petroleum Industry Act in 2021.
According to Onanuga, the Petroleum Industry Act introduced legal and structural mechanisms that have led to significant revenue losses to the Federation through various deductions, charges, and fees.
Under the existing framework of the Act, NNPC Limited retains 30 percent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas generated from Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts.
The company also keeps 20 percent of its profits as retained earnings to fund working capital and future investments.
The Federal Government maintains that the additional 30 percent management fee is unnecessary, arguing that the 20 percent retained earnings sufficiently cover the company’s operational needs under these arrangements.
Furthermore, NNPC Limited withholds another 30 percent of profit oil and profit gas for the Frontier Exploration Fund in line with Sections 9(4) and (5) of the Petroleum Industry Act.
Onanuga explained that the Frontier Exploration Fund, which is intended for speculative exploration activities, could lead to the buildup of idle funds and foster inefficient spending at a time when national resources are urgently required for key priorities such as security, education, healthcare, and energy transition projects.
The Executive Order also addresses the Midstream and Downstream Gas Infrastructure Fund, which is financed through gas flaring penalties under Section 104 of the Act.
Onanuga noted that Section 103 of the Act already provides for an Environmental Remediation Fund managed by the Nigerian Upstream Petroleum Regulatory Commission to rehabilitate communities affected by upstream petroleum operations, making continued payments into the Midstream and Downstream Gas Infrastructure Fund redundant.
“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,” Onanuga said.
The Executive Order aims to remove overlapping and redundant provisions within the Petroleum Industry Act and NNPC Limited’s governance framework, including the repeated 30 percent deductions tied to profit-sharing arrangements.
Its goal is to safeguard revenues intended for the Federation Account so that the three levels of government can effectively address critical national needs.
Onanuga further stated that President Tinubu has raised concerns about NNPC Limited’s ongoing role as a concessionaire under Production Sharing Contracts.
He explained that permitting the company to influence operating costs while also operating as a commercial entity could create market distortions and hinder its full transition into a profit-driven enterprise as envisioned under the Petroleum Industry Act.
The Executive Order introduces immediate steps to plug revenue leakages, improve transparency, eliminate duplication, and reposition NNPC Limited strictly as a commercial operator while protecting the Federation’s financial interests.
The President stressed that these reforms are urgently needed due to their impact on national budgeting, debt sustainability, economic stability, and the welfare of Nigerians.
He also announced plans for a comprehensive review of the Petroleum Industry Act in collaboration with key stakeholders to correct fiscal and structural irregularities.
According to the gazetted Executive Order, NNPC Limited will cease to collect and administer the 30 percent Frontier Exploration Fund, and all profits previously allocated to that fund will now be paid directly into the Federation Account.
NNPC Limited will no longer receive the 30 percent management fee on profit oil and profit gas revenues due to the Federation Account.
All oil and gas operators or contractors operating under Production Sharing Contracts are required, effective February 13, 2026, to remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and other statutory payments directly into the Federation Account.
Payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund have been halted, and proceeds from gas flaring penalties will now be paid straight into the Federation Account, with any expenditure from the fund subject to public procurement regulations.
President Tinubu has approved the formation of a joint project team to coordinate integrated petroleum operations, with the regulatory commission serving as the liaison with license holders and lessees where upstream and midstream activities are fully integrated.
An Implementation Committee has also been constituted to ensure the coordinated and effective execution of the Executive Order.
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, the Minister of State for Petroleum Resources, 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 act as the committee’s secretariat.
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