President Bola Tinubu has issued an Executive Order to redirect oil and gas revenues directly to the national federation account, bypassing the state-owned Nigerian National Petroleum Company (NNPC). The order, which has been formally gazetted, aims to reverse provisions of the 2021 Petroleum Industry Act (PIA) that the government argues unlawfully divert substantial public funds.

Key Changes to Revenue Flows

The order eliminates several major deductions previously retained by NNPC. First, it removes NNPC's entitlement to a 30% management fee on profit oil and gas from production sharing, profit sharing, and risk service contracts. The government deems this fee unjustified, arguing that NNPC's existing 20% profit retention for working capital and investments is sufficient. Second, NNPC will no longer collect or manage the 30% of profit oil and gas earmarked for the Frontier Exploration Fund; these funds must now be transferred to the federation account. The presidency criticized this large, speculative exploration fund for risking idle cash and inefficient spending when resources are needed for national priorities like security and healthcare.

Addressing Duplication and Structural Issues

The order also suspends payments of gas flaring penalties into the Midstream & Downstream Gas Infrastructure Fund (MDGIF), requiring the regulator NUPRC to pay these proceeds into the federation account. This move addresses perceived duplication, as the PIA already established a separate Environmental Remediation Fund for community rehabilitation. Furthermore, Tinubu identified structural concerns regarding NNPC's dual role as both a concessionaire influencing operating costs and a commercial entity under Production Sharing Contracts, which he stated creates competitive distortions and undermines NNPC's transition to a fully commercial operator.

Implementation and Broader Review

To enforce these changes, all operators and contractors under Production Sharing Contracts must now pay royalties, taxes, and profit shares directly to the federation account. Tinubu has approved the formation of a joint team for integrated petroleum operations, with NUPRC as the primary interface, and established an implementation committee to ensure the order's execution. The administration also plans a comprehensive review of the PIA in consultation with stakeholders to address the identified fiscal and structural anomalies.

Reactions and Concerns

The order has sparked significant debate. A political commentator described its language as "robust and angry," while some local reports and the oil and gas trade union Pengassan have questioned its constitutionality, arguing it cannot override the PIA. Pengassan's president disputed the government's revenue figures, claimed the actual percentage going to NNPC is below 2%, and warned the order threatens 4,000 NNPC jobs and could undermine investor confidence in the stability of the PIA framework.