By Lemmy Ughegbe, Ph.D
President Bola Ahmed Tinubu’s latest executive order directing that royalty oil, tax oil, profit oil, profit gas, and other government earnings under production-sharing and related contracts be remitted directly into the Federation Account is being hailed in some quarters as a bold fiscal reset.
If fully implemented, analysts estimate it could unlock as much as N14trn to N15trn annually for distribution among federal, state, and local governments.
On its face, the reform speaks to transparency, discipline and equity. The President has argued that excessive deductions, layered retention mechanisms and overlapping funds have weakened remittances and slowed development.
Few Nigerians would disagree that oil revenue management has long suffered from opacity and discretionary practices that undermine public trust. In a period marked by fiscal strain and concerns about debt sustainability, strengthening remittance accountability is a legitimate public finance priority.
Yet beyond the fiscal appeal lies a deeper constitutional question: can an executive order effectively alter structures created under an Act of the National Assembly?
The Petroleum Industry Act 2021 is not an administrative guideline. It is a statute duly passed by the legislature and assented to by the President. It established defined mechanisms for revenue retention, including the Frontier Exploration Fund, the Midstream and Downstream Gas Infrastructure Fund, and management fee arrangements embedded within Production Sharing Contract fiscal structures. These provisions were statutory constructs, not discretionary practices.
Under the 1999 Constitution, legislative power resides in the National Assembly. Executive power, vested in the President under Section 5, exists to implement and enforce the law, not to amend or suspend it. The hierarchy is clear. The Constitution stands supreme. Beneath it sit Acts of the National Assembly. Executive orders derive their legitimacy from both, but they cannot override either.
This is where the current controversy becomes serious. If the executive directive merely clarifies implementation within the existing framework of the Petroleum Industry Act, it falls within the executive’s legitimate authority. But if it suspends, neutralises, or materially alters statutory provisions without legislative amendment, then it risks being characterised as ultra vires, an exercise of power beyond constitutional limits.
Energy policy analysts have pointed out that clarity is essential to distinguish between contractual revenue allocations embedded in Production Sharing Contracts, corporate retained earnings of NNPC Limited as a CAMA-incorporated entity, and statutory earmarked funds created under the Petroleum Industry Act.
Conflating these categories risks creating legal ambiguity. Transparency reform must not inadvertently undermine contractual stability or statutory coherence.
The constitutional vulnerability is not theoretical. Nigerian jurisprudence recognises the doctrine of covering the field: where the legislature has comprehensively regulated a subject, inconsistent executive action becomes impermissible.
The Petroleum Industry Act establishes an elaborate fiscal architecture. If an executive directive occupies the same field in a manner inconsistent with that statute, it presents a credible litigation risk.
Global democratic practice reinforces this principle. In the United States, when President Harry Truman attempted in 1952 to seize steel mills through executive order without congressional authorisation, the Supreme Court struck it down in Youngstown Sheet & Tube Co. v. Sawyer, holding that executive power cannot contradict statutory law. The issue was not economic necessity, but constitutional pathway.
In the United Kingdom, the Supreme Court ruled in 2019 that Prime Minister Boris Johnson’s prorogation of Parliament was unlawful because it frustrated parliamentary sovereignty. Executive expediency could not override legislative authority.
In Kenya, courts have invalidated executive initiatives that bypassed constitutional procedure, reaffirming that reform must travel through lawful channels.
In each instance, reform was not rejected. It was regularised.
There is also the question of NNPC Limited’s corporate autonomy. Under the Petroleum Industry Act, NNPC Limited was incorporated as a commercially oriented entity under CAMA, designed to operate with a defined degree of insulation from direct political control.
While the government retains shareholder influence, micromanagement through executive directive over retained earnings or internal commercial structures may face scrutiny unless anchored in statutory amendment.
Beyond domestic constitutional issues lie potential contractual implications. Production Sharing Contracts and related petroleum agreements are binding legal instruments, often supported by stabilisation clauses and, in some cases, international investment protections.
If revenue flows are materially altered in ways that affect agreed fiscal structures, counterparties may argue breach of contract or pursue arbitration under international frameworks. The risk is not inevitable, but it is credible.
None of this negates the legitimacy of reform. Nigeria’s oil revenue architecture has long required rationalisation. Redirecting royalty oil, tax oil, and profit oil directly into the Federation Account may enhance transparency and reduce intermediation. Sub-national governments struggling with deficits would understandably welcome stronger inflows.
But revenue is not synonymous with reform.
Fiscal discipline achieved through constitutional ambiguity risks undermining institutional credibility. Ownership of petroleum resources under Section 44(3) of the Constitution does not automatically confer authority to redesign revenue allocation mechanisms that Parliament has already codified. Once the National Assembly has legislated comprehensively on revenue management, the Executive is expected to operate within that framework.
If statutory provisions require adjustment, then legislative amendment is the lawful and durable route. That process may be slower and politically demanding, but it preserves constitutional order and investor confidence. Reform achieved through clear legal channels strengthens institutions. Reform achieved through interpretive stretch weakens them.
There is also a federalism dimension. The Federation Account is not an executive instrument. It is a constitutional pool shared across tiers of government. Altering inflow structures inevitably reshapes fiscal balances within the federation. Such changes deserve parliamentary scrutiny and transparent debate.
The courts, if called upon, may not invalidate the entire executive order. A more probable outcome would be selective invalidation, striking down provisions that directly conflict with the Petroleum Industry Act while upholding transparency-enhancing measures that align with existing law. In constitutional litigation, process often matters more than policy outcome.
The question, therefore, is not whether the reform could increase revenue. It likely will. The question is whether reform must travel through the discipline of law or be achieved through executive fiat. Executive boldness is admirable. Executive overreach is dangerous. The difference lies in respect for constitutional boundaries.
If reform requires rewriting statutory provisions, then the law must be rewritten properly, through the National Assembly, not redirected administratively via executive order. Nigeria’s oil wealth deserves transparency. Its democracy deserves legality. After all, in the long run, stability is worth more than speed.
Dr Lemmy Ughegbe, FIMC, CMC
Email: lemmyughegbeofficial@gmail.com
WhatsApp ONLY: +2348069716645
