By Cross Udo, Abuja
President Bola Tinubu on Wednesday signed an Executive Order aimed at boosting oil and gas revenues accruing to Nigeria’s Federation Account by eliminating what the Federal Government described as wasteful deductions under the Petroleum Industry Act (PIA).
The Executive Order seeks to curb leakages, eliminate duplicative structures in the oil and gas sector, and redirect more resources to the Federal, state and local governments.
A statement by the presidential spokesman, Bayo Onanuga, said the President signed the order pursuant to Section 5 of the Constitution of the Federal Republic of Nigeria (as amended).
According to the statement, the directive is anchored on Section 44(3) of the Constitution, which vests ownership and control of mineral resources in the Government of the Federation.
The presidency explained that the order is designed to restore revenue entitlements of the three tiers of government that were reduced following provisions introduced under the PIA in 2021.
*Executive Order targets leakages, duplications under the controversial PIA framework
It stated, “Under the current PIA framework, NNPC Limited retains 30 per cent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas derived from Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts.
“In addition, the company retains 20 per cent of its profits to cover working capital and future investments.
“Given the existing 20% retention, the additional 30% management fee is considered unjustified by the Federal Government, as the retained earnings are already sufficient to support the functions NNPCL performs under these contracts.”
The statement further disclosed that NNPC Limited also retains another 30 per cent of profit oil and gas under the Frontier Exploration Fund.
“A fund of this size, being devoted to speculative exploration, risks accumulating large idle cash balances, which would encourage inefficient exploration spending, at a time when government resources are urgently needed for core national priorities, including security, education, healthcare, and energy transition investments,” it added.
The presidency also identified duplications involving gas-flare penalty funds.
“There is also the Midstream and Downstream Gas Infrastructure Fund (MDGIF). However, section 103 of the PIA has already established a dedicated Environmental Remediation Fund, specifically designed to fund the rehabilitation of communities negatively impacted by upstream petroleum operations,” the statement said.
It noted that the multiple deductions significantly reduced funds available to the government.
“All these deductions far exceed global norms and effectively divert more than two-thirds of potential remittances to the Federation Account.
“The continuing decline in net oil revenue inflows is largely attributable to these deductions and fragmented oversight under the current PIA architecture.”
The presidency added that the Executive Order would address these concerns.
“The Executive Order aims to resolve… the duplicative 30 per cent deduction… The objective is to eliminate unjustified multiple layers of deductions that erode revenues that ought to accrue to the Federation Account, enabling the three tiers of government to pursue critical national priorities.”
As part of the directive, NNPC Limited will no longer collect or manage the 30 per cent Frontier Exploration Fund, and the funds will now be paid directly into the Federation Account.
NNPC will also no longer receive the 30 per cent management fee on oil and gas profits.
In addition, all oil and gas operators under production-sharing contracts are now required to remit royalties, taxes, and profit oil directly to the Federation Account.
President Tinubu also suspended payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund, directing that such proceeds be paid into the Federation Account instead.
The President said the reforms were necessary to strengthen public finances.
“The Executive Order, therefore, introduces immediate measures to curb leakages, enhance transparency, eliminate duplicative structures, and reposition NNPC Limited strictly as a commercial enterprise, while safeguarding the Federation’s interests.
“The President affirmed that the reforms are of urgent national importance, given their implications for national budgeting, debt sustainability, economic stability, and the overall well-being of Nigerians.”
Tinubu also approved the establishment of an implementation committee comprising key ministers and officials to ensure the effective execution of the order.
He further directed a comprehensive review of the Petroleum Industry Act to address fiscal and structural gaps identified in the oil sector.
