President Bola Ahmed Tinubu has signed an Executive Order mandating the direct remittance of oil and gas revenues to the Federation Account, in a sweeping reform aimed at curbing revenue leakages, eliminating duplicative deductions, and strengthening fiscal stability.
The directive, signed 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.
According to the Presidency, the order seeks to restore the constitutional revenue entitlements of federal, state and local governments, which it said were significantly reduced under the framework established by the Petroleum Industry Act (PIA) in 2021.
Under the existing structure, Nigerian National Petroleum Company Limited (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 retains 20 per cent of its profits for working capital and future investments.
The Federal Government maintains that the additional 30 per cent management fee is unjustified, given the existing 20 per cent profit retention.
Furthermore, NNPC Limited retains another 30 per cent of its profit oil and profit gas under Sections 9(4) and (5) of the PIA as the Frontier Exploration Fund. The government expressed concern that the scale of the fund, devoted to speculative exploration, risks accumulating idle balances at a time of pressing national needs in security, education, healthcare and energy transition.
The Executive Order also addresses the Midstream and Downstream Gas Infrastructure Fund (MDGIF), established under Section 52(7)(d) of the PIA and funded through gas flaring penalties under Section 104. The government noted that Section 103 of the Act already provides for an Environmental Remediation Fund, administered by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), for rehabilitating communities affected by upstream petroleum operations, including gas flaring.
The Presidency stated that the multiplicity of deductions under the PIA framework has resulted in more than two-thirds of potential oil revenues being diverted from the Federation Account, contributing to declining net inflows.
Under the new order, NNPC Limited will no longer collect or manage the 30 per cent Frontier Exploration Fund. The portion of profit oil and profit gas previously earmarked for that fund is to be transferred directly to the Federation Account.
Similarly, the company will cease to receive the 30 per cent management fee on Profit Oil and Profit Gas due to the Federation.
With effect from February 13, 2026, all operators and contractors under production sharing arrangements are required to remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas and any other government interest directly to the Federation Account.
The President also suspended further payments of gas flare penalties into the MDGIF, directing that all such proceeds be paid into the Federation Account. Expenditures from the MDGIF, where applicable, are to comply strictly with extant public procurement laws and regulations.
The Executive Order further introduces structural reforms, including repositioning NNPC Limited strictly as a commercial enterprise, while addressing concerns over its continued role as a concessionaire under Production Sharing Contracts.
To ensure effective implementation, the President 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 secretary.
The administration said the reforms are of urgent national importance, citing implications for budgeting, debt sustainability, economic stability and overall national development. It added that a comprehensive review of the Petroleum Industry Act will be undertaken in consultation with relevant stakeholders to address fiscal and structural anomalies.
