President Bola Tinubu has signed a new Executive Order aimed at protecting and boosting oil and gas revenues accruing to the Federation, cutting wasteful expenditure, dismantling duplicative structures within the sector, and channeling resources toward national development priorities.
The directive was issued pursuant to Section 5 of the Constitution of the Federal Republic of Nigeria (as amended).
The order is anchored on Section 44(3) of the Constitution, which vests ownership and control of all minerals, mineral oils, and natural gas in, under, and upon any land in Nigeria, including territorial waters and the Exclusive Economic Zone, in the Government of the Federation.
According to details of the directive, the measure seeks to restore constitutional revenue entitlements of the federal, state, and local governments that were altered under the Petroleum Industry Act.
The Act, enacted in 2021, introduced legal and structural provisions that have led to significant deductions from Federation revenues through various charges and fees.
Under the current framework of the PIA, 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.
The company also withholds 20 per cent of its profits to fund working capital and future investments.
Federal authorities contend that, given the existing 20 per cent profit retention, the additional 30 per cent management fee is unnecessary, as the retained earnings are considered adequate to support NNPC Limited’s operational responsibilities under the relevant contracts.
In addition, NNPC Limited retains another 30 per cent of its profit oil and profit gas under the production sharing, profit sharing, and risk service contracts as the Frontier Exploration Fund in line with Sections 9(4) and (5) of the PIA. The government expressed concern that allocating such a substantial fund to frontier exploration—considered speculative—could result in large idle cash balances and inefficient spending, especially at a time when resources are needed for security, education, healthcare, and energy transition initiatives.
The PIA also established the Midstream and Downstream Gas Infrastructure Fund (MDGIF) under Section 52(7)(d), financed through gas flaring penalties provided for under Section 104. The MDGIF is intended to support environmental remediation and relief for communities affected by gas flaring. However, Section 103 of the Act already provides for a dedicated Environmental Remediation Fund, administered by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), funded through contributions by lessees to rehabilitate communities impacted by upstream petroleum operations, including gas flaring.
Government sources indicated that the cumulative effect of these deductions significantly reduces potential remittances to the Federation Account, with more than two-thirds of prospective revenues diverted under the existing structure. The decline in net oil revenue inflows has been attributed largely to these deductions and fragmented oversight mechanisms within the PIA framework.
The Executive Order seeks to address overlapping provisions and eliminate what it describes as duplicative 30 per cent deductions in profit-sharing arrangements. It aims to streamline regulatory instruments within the PIA structure and NNPC Limited’s governance framework to remove multiple layers of deductions that erode funds due to the Federation Account and, by extension, the three tiers of government.
The President also raised concerns about NNPC Limited’s continued role as a concessionaire under Production Sharing Contracts. The current arrangement, which allows the company to influence operating costs while functioning as a commercial entity, is seen as potentially distorting competition and hindering its transition into a fully commercial operator as envisioned by the PIA.
The Executive Order introduces immediate measures designed to curb revenue leakages, improve transparency, dismantle redundant structures, and reposition NNPC Limited strictly as a commercial enterprise while safeguarding the Federation’s financial interests.
President Tinubu stated that the reforms are of urgent national importance, citing their implications for budgeting, debt sustainability, economic stability, and citizens’ welfare.
He also disclosed that his administration would undertake a comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address identified fiscal and structural issues.
Under the gazetted order, NNPC Limited will no longer collect or manage the 30 per cent Frontier Exploration Fund. Instead, the 30 per cent profit from oil and gas under production sharing, profit sharing, and risk service contracts previously allocated to the fund will now be remitted directly to the Federation Account.
The company will also cease to collect the 30 per cent management fee on profit oil and profit gas revenues meant for the Federation Account.
Furthermore, all operators and contractors holding oil and gas assets under production sharing contracts are required, effective February 13, 2026, to remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and any other government-entitled interests directly to the Federation Account.
The President also suspended payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund. The Commission is directed to pay proceeds from all gas flaring penalties into the Federation Account from the effective date and discontinue transfers to the MDGIF. Expenditures from the MDGIF are to comply with existing public procurement laws, policies, and regulations.
In addition, the President approved the formation of a joint project team to execute integrated petroleum operations, with the Commission serving as the interface with licensees and lessees where upstream and midstream operations are combined.
An Implementation Committee has also been constituted to oversee coordinated execution of the Executive Order. Members 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 for Petroleum Resources (Oil). Other members are 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.
