President Bola Tinubu yesterday signed an Executive Order (EO) aimed at increasing oil and gas revenues going into Nigeria’s Federation Account by removing wasteful deductions under the Petroleum Industry Act (PIA).
The Presidential spokesman, Bayo Onanuga, said the EO is based on Section 44(3) of the Constitution, which gives the Federal Government ownership and control over all minerals, mineral oils, and natural gas in, under, and on Nigerian land, including territorial waters and the Exclusive Economic Zone.
The statement explained that the order seeks to restore the revenue rights of the federal, state, and local governments that were reduced in 2021 by the PIA. The law introduced structures that allow substantial Federation revenues to be lost through various deductions, charges, and fees.
It said: “Under the current PIA framework, NNPC Limited keeps 30 per cent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas from Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts.
“In addition, the company retains 20 per cent of its profits for working capital and future investments.
“Given this 20% retention, the extra 30% management fee is considered unnecessary by the Federal Government, as the retained earnings are already enough to support NNPC Limited’s functions under these contracts.
“NNPC Limited also keeps another 30% of its profit oil and profit gas under these contracts as the Frontier Exploration Fund under sections 9(4) and (5) of the PIA. A fund this large, meant for speculative exploration, risks holding idle cash and encourages inefficient spending, at a time when government resources are urgently needed for priorities like security, education, healthcare, and energy transition.”
The statement added: “There is also the Midstream and Downstream Gas Infrastructure Fund (MDGIF) under Section 52(7)(d) PIA, funded by gas flaring penalties under Section 104. It is meant to support environmental cleanup and relief for communities affected by gas flaring.
“However, Section 103 of the PIA already created an Environmental Remediation Fund, managed by NUPRC, specifically for rehabilitating communities affected by upstream petroleum operations, including gas flaring. Section 103 also charges lessees to contribute to this fund.
“All these deductions are higher than global standards and divert more than two-thirds of potential funds from the Federation Account. The ongoing drop in net oil revenue is largely due to these deductions and fragmented oversight under the current PIA.”
The EO aims to stop the duplicative 30% deduction on profit-sharing by fixing overlapping and redundant rules across all laws and regulations under the PIA and NNPC Limited’s structure.
The goal is to remove unnecessary multiple deductions that reduce funds meant for the Federation Account, giving all three levels of government more resources for critical national needs.
The President also highlighted structural issues with NNPC Limited acting as a concessionaire under Production Sharing Contracts. The current setup, where the company controls operating costs while acting as a commercial entity, can create unfair competition and hinder its transformation into a fully commercial operator as planned under the PIA.
The Executive Order introduces measures to stop revenue leakages, improve transparency, remove duplicate structures, and position NNPC Limited as a purely commercial business, while protecting the Federation’s interests.
In rolling out the order, President Tinubu said the reforms are urgent for national budgeting, debt management, economic stability, and the well-being of Nigerians.
