By Our Reporter
President Bola Ahmed Tinubu has signed an executive order directing the immediate remittance of oil and gas revenues to the Federation Account in a sweeping reform aimed at curbing revenue leakages, eliminating duplicative structures and strengthening fiscal transparency in Nigeria’s petroleum sector.
The directive, issued under Section 5 of the Constitution of the Federal Republic of Nigeria, is designed to safeguard national earnings from the oil and gas industry and restore revenue entitlements to the federal, state and local governments.
It is also anchored on Section 44(3) of the Constitution, which vests ownership and control of mineral resources, including crude oil and natural gas, in the Federal Government.
According to the State House, the order seeks to reverse structural arrangements introduced under the Petroleum Industry Act (PIA), which the government said created multiple deductions, fees and charges that significantly reduced remittances to the Federation Account.
The administration noted that these deductions had diverted substantial oil income away from the three tiers of government and contributed to declining net revenue inflows.
Under the previous framework, NNPC Limited retained 30 percent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas derived from production sharing, profit sharing and risk service contracts, in addition to retaining 20 percent of its profits for working capital and future investments.
The government described the additional 30 percent management fee as unjustified, arguing that retained earnings already provided adequate operational support for the company.
The order further targets the Frontier Exploration Fund established under the PIA, which allowed the national oil company to retain another 30 percent of profit oil and gas for exploration activities.
The Federal Government expressed concern that such a large allocation to speculative exploration risked creating idle funds and inefficient spending at a time when resources were needed for security, education, healthcare and energy transition initiatives.
It also suspended payments into the Midstream and Downstream Gas Infrastructure Fund, previously financed through gas flaring penalties, directing that such proceeds be paid directly into the Federation Account.
The government said environmental remediation obligations were already covered under an existing fund administered by regulators.
With the new order, NNPC Limited will no longer collect or manage the Frontier Exploration Fund and will cease to retain the 30 percent management fee on profit oil and gas.
Instead, all revenues from production sharing, profit sharing and risk service contracts are to be paid directly into the Federation Account.
In addition, all oil and gas operators and contractors under production sharing arrangements are now required to remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas and any other government entitlements directly to the Federation Account with effect from February 13, 2026.
The President also approved the constitution of a joint project team to oversee integrated petroleum operations, with the relevant commission serving as the interface with licensees and lessees where upstream and midstream activities are combined.
To ensure effective implementation, an inter-ministerial committee has been established 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 Presidency said the reforms were of urgent national importance, given their implications for budgeting, debt sustainability and economic stability, adding that a broader review of the Petroleum Industry Act would be undertaken in consultation with stakeholders to address fiscal and structural gaps in the sector.
According to the State House, the executive order is intended to reposition NNPC Limited strictly as a commercial enterprise, strengthen oversight, eliminate overlapping deductions and ensure that oil and gas revenues are fully utilised for national development priorities and the well-being of Nigerians.
