President Bola Ahmed Tinubu has signed a sweeping executive order mandating the direct remittance of oil and gas revenues into the Federation Account, in a move aimed at plugging revenue leakages, eliminating duplicative deductions, and boosting funds available to federal, state and local governments.
The directive, signed pursuant to Section 5 of the 1999 Constitution (as amended), is anchored on Section 44(3), which vests ownership and control of Nigeria’s mineral resources in the Federal Government.
According to the Presidency, the order seeks to restore revenue entitlements of the three tiers of government that were altered under the Petroleum Industry Act. The government argued that structural and legal provisions introduced by the Act have enabled multiple deductions, charges and retention mechanisms that significantly reduce net remittances to the Federation Account.
Under the existing framework, NNPC Limited retains 30 per cent of profit oil and profit gas from Production Sharing Contracts, Profit Sharing Contracts and Risk Service Contracts as a management fee. In addition, the company keeps 20 per cent of its profits for working capital and future investments.
The Federal Government said the additional 30 per cent management fee is unjustified, given the existing 20 per cent profit retention. It also raised concerns over another 30 per cent deduction earmarked for the Frontier Exploration Fund under Sections 9(4) and (5) of the PIA, describing the fund as disproportionately large and potentially prone to inefficient spending at a time of pressing national needs.
The order further addresses the Midstream and Downstream Gas Infrastructure Fund (MDGIF), funded through gas flaring penalties. The Presidency noted that Section 103 of the PIA had already created a separate Environmental Remediation Fund for host communities affected by upstream petroleum operations, making the MDGIF structure duplicative.
With these multiple deductions, government officials said more than two-thirds of potential oil revenues are diverted before reaching the Federation Account, contributing to declining net inflows.
Under the new executive order, NNPC Limited will no longer collect or manage the 30 per cent Frontier Exploration Fund. The 30 per cent profit oil and gas previously allocated to the fund will now 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.
In addition, all operators and contractors under production sharing arrangements are required, with effect from February 13, 2026, to remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas and any other government entitlements directly to the Federation Account.
Gas flare penalties will no longer be paid into the MDGIF. Instead, proceeds from such penalties will be paid into the Federation Account, while expenditures from the MDGIF must comply strictly with public procurement laws and regulations.
President Tinubu also raised structural concerns about NNPC Limited’s continued role as a concessionaire under Production Sharing Contracts, noting that the arrangement could create competitive distortions and undermine its transition into a fully commercial entity as envisioned under the PIA.
To drive implementation, the President approved the establishment of an Implementation Committee comprising the Minister of Finance and Coordinating Minister of the Economy; 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; 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.
A joint project team will also be constituted to execute integrated petroleum operations, with the Commission serving as interface with licensees and lessees in combined upstream and midstream operations.
The President described the reforms as urgent and critical to national budgeting, debt sustainability and economic stability, adding that his administration will undertake a comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address fiscal and structural anomalies.
