NNPC must cough up cash as Tinubu issues new executive order

…Federation account to earn above N1.4 trillion

President Bola Tinubu has signed an executive order directing the Nigerian National Petroleum Company (NNPC) Limited to remit oil and gas revenues directly to the Federation Account, stripping the company of billions of naira in deductions that his administration says have starved federal, state and local governments of their constitutional entitlements.

The order, gazetted on February 13, takes direct aim at a series of deductions embedded in Nigeria’s 2021 Petroleum Industry Act (PIA) that the presidency says have allowed NNPC to divert more than two-thirds of potential remittances away from the account, through which revenues are shared among the country’s three tiers of government.

“The continuing decline in net oil revenue inflows is largely attributable to these deductions and fragmented oversight under the current PIA architecture,” the presidency said in a statement issued by Bayo Onanuga, special adviser to the president.

“All these deductions far exceed global norms,” the State House said, adding that the continuing decline in net oil revenue inflows was “largely attributable to these deductions and fragmented oversight under the current PIA architecture.”

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Under the order, NNPC Limited will immediately lose its entitlement to a 30 percent management fee on profit oil and profit gas derived from Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts, a deduction the Federal Government called unjustified given that the company already retains 20 percent of its profits to cover working capital and future investments.

The company will also cease collecting the 30 percent Frontier Exploration Fund carved out under Sections 9(4) and (5) of the PIA. Tinubu’s government argued that a fund of that scale, devoted to speculative exploration, risked accumulating idle cash balances, thereby encouraging wasteful spending at a time when Nigeria urgently needs resources for security, education, healthcare and energy transition.

Also, all operators and contractors holding oil and gas assets under production sharing contracts will be required, from February 13, to pay Royalty Oil, Tax Oil, Profit Oil, Profit Gas and any other government-due interest directly into the Federation Account, bypassing NNPC as an intermediary.

Tinubu also suspended payments of gas flaring penalties into the Midstream and Downstream Gas Infrastructure Fund (MDGIF), ordering that all such proceeds flow instead to the Federation Account. Future expenditure from the MDGIF will be subject to public procurement laws and regulations.

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Beyond the immediate revenue grab, the order reflects deeper concerns within the presidency about NNPC’s dual role as both a commercial operator and a concessionaire under production sharing arrangements, a structure that creates competitive distortions and undermines the company’s transition into a fully commercial enterprise as envisioned under the PIA.

Published FAAC-based reporting shows that NNPC Limited’s 2025 budget for the combined 30 percent management fee and 30 percent Frontier Exploration Fund was approximately N1.42 trillion for the year, a figure that illustrates the magnitude of revenues the executive order now redirects to the Federation Account for sharing among federal, state and local governments.

Beyond the immediate revenue grab, the order reflects deeper concerns within the presidency about NNPC’s dual role as both a commercial operator and a concessionaire under production sharing arrangements, a structure that creates competitive distortions and undermines the company’s transition into a fully commercial enterprise as envisioned under the PIA.

“The existing framework, which allows the company to influence operating costs while simultaneously functioning as a commercial entity, creates potential competitive distortions,” the State House said.

The order is anchored in Section 44(3) of Nigeria’s constitution, which vests ownership and control of all minerals, mineral oils and natural gas in the Federal Government, and signed under the authority granted by Section 5.

To oversee the rollout, Tinubu approved the establishment of an implementation committee chaired by the Finance Minister and Coordinating Minister of the Economy, with members including the Attorney-General of the Federation, the Minister of Budget and National Planning, the Minister of State for Petroleum Resources (Oil), the Chairman of the Nigeria Revenue Service and the Special Adviser to the President on Energy. The Budget Office of the Federation will serve as secretariat.

The presidency also approved the constitution of a joint project team to execute integrated petroleum operations, with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) designated as the interface with licensees and lessees where upstream and midstream operations are combined.

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The executive order is unlikely to be the last word on the matter. Tinubu signalled that his administration will pursue a comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address what the presidency described as wider “fiscal and structural anomalies” in the law.

Nigeria, Africa’s largest oil producer, has for years struggled with a yawning gap between gross crude production and actual revenues reaching government coffers, a problem successive administrations have blamed on subsidy costs, crude theft, opaque deductions and underperformance by NNPC.

Tinubu, who removed a costly petrol subsidy shortly after taking office in May 2023, has made fiscal reforms a central plank of his economic agenda.

Dipo Oladehinde is a skilled energy analyst with experience across Nigeria's energy sector alongside relevant know-how about Nigeria’s macro economy.

He provides a blend of market intelligence, financial analysis, industry insight, micro and macro-level analysis of a wide range of local and international issues as well as informed technical rudiments for policy-making and private directions.

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