By Ihechi Enyinnaya
President Bola Tinubu has signed an Executive Order mandating the direct remittance of oil and gas revenues to the Federation Account, in a sweeping move aimed at boosting government earnings, eliminating duplications, and strengthening transparency in the petroleum sector.
The order, issued pursuant to Section 5 of the 1999 Constitution (as amended) and anchored on Section 44(3), reaffirms the Federal Government’s ownership and control over the nation’s mineral resources, including crude oil and natural gas.
According to the Presidency, the directive seeks to restore full constitutional revenue entitlements to the Federal, State and Local Governments, following concerns that provisions of the Petroleum Industry Act (PIA) have significantly reduced net inflows to the Federation Account through multiple deductions and retained funds.
Under the existing PIA framework, NNPC Limited retains 30 per cent of profit oil and profit gas as a management fee on Production Sharing Contracts (PSCs), Profit Sharing Contracts, and Risk Service Contracts. The company also keeps 20 per cent of its profits for working capital and future investments.
The Federal Government considers the additional 30 per cent management fee unjustifiable, arguing that the 20 per cent profit retention already covers operational and investment needs.
The Executive Order further addresses the 30 per cent allocation of profit oil and profit gas to the Frontier Exploration Fund under Sections 9(4) and (5) of the PIA. The Presidency expressed concern that such large allocations to speculative exploration risk creating idle funds at a time when resources are urgently required for national priorities such as security, education, healthcare and energy transition.
In addition, President Tinubu suspended the payment of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund (MDGIF). Instead, all penalties collected for gas flaring will now be paid directly into the Federation Account. Expenditures from the MDGIF must comply strictly with existing public procurement laws and regulations.
Under the new directive, NNPC Limited will no longer collect or manage the 30 per cent Frontier Exploration Fund. The 30 per cent profit currently earmarked for the fund will henceforth be transferred directly to the Federation Account. The company will also cease collecting the 30 per cent management fee on profit oil and profit gas revenues.
Furthermore, all operators and contractors under production sharing contracts are required, effective February 13, 2026, to remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and all other government entitlements directly to the Federation Account.
The President also raised structural concerns about NNPC Limited’s dual role as concessionaire and commercial operator under Production Sharing Contracts, noting that the arrangement could distort competition and undermine its transition into a fully commercial entity as envisaged under the PIA.
To ensure effective implementation, President Tinubu has constituted 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, and the Minister of State for Petroleum Resources (Oil). Other members include 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 President described the reforms as urgent and critical to national budgeting, debt sustainability, economic stability and the overall welfare of Nigerians. He also announced plans for a comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address identified fiscal and structural concerns.