Oil Companies Now Required to Remit Revenue Directly to Nigerian Government Coffers
By Naija Enquirer Staff
President Bola Tinubu has signed a landmark Executive Order (EO) to safeguard and enhance oil and gas revenues for the Federation, curb wasteful spending, eliminate duplicative structures, and redirect resources for the benefit of Nigerians. The EO, issued pursuant to Section 5 of the Constitution of the Federal Republic of Nigeria (as amended), targets reforms in the petroleum sector and addresses fiscal inefficiencies in revenue collection.
Rationale Behind the Executive Order
The EO is anchored on Section 44(3) of the Constitution, which vests ownership, control, and derivative rights in all minerals, mineral oils, and natural gas in the Government of the Federation. The order seeks to restore the constitutional revenue entitlements of federal, state, and local governments, which were significantly reduced under the Petroleum Industry Act (PIA) through multiple deductions, fees, and sundry charges.
Under the current PIA framework, NNPC Limited (NNPCL) retains:
- 30% of Federation oil revenues as a management fee on Profit Oil and Profit Gas derived from Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts.
- 20% of profits for working capital and future investments.
- 30% of Profit Oil and Profit Gas under the Frontier Exploration Fund for speculative exploration.
- Revenue from gas flaring penalties collected into the Midstream and Downstream Gas Infrastructure Fund (MDGIF).
The EO identifies these deductions as excessive and duplicative, effectively diverting more than two-thirds of potential remittances away from the Federation Account. The move aims to curb revenue leakages and reposition NNPCL as a strictly commercial operator while safeguarding public resources.
Key Provisions of the Executive Order
- Direct Revenue Remittance: All oil and gas operators under Production Sharing Contracts must now remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and any other interest directly into the Federation Account.
- Frontier Exploration Fund: NNPCL will no longer collect or manage the 30% Frontier Exploration Fund. These proceeds will be remitted directly to the Federation Account.
- Management Fees: NNPCL will no longer be entitled to the 30% management fee on profit oil and profit gas revenues.
- Gas Flare Penalties: All gas flaring penalties will now be paid into the Federation Account, suspending transfers to the MDGIF.
- Integrated Petroleum Operations: A joint project team will coordinate upstream and midstream operations under a streamlined interface with licensees and lessees.
Implementation and Oversight
The President has approved the establishment of an Implementation Committee to ensure coordinated and effective execution of the EO. Members include:
- Minister of Finance and Coordinating Minister of the Economy
- Attorney-General of the Federation and Minister of Justice
- Minister of Budget and National Planning
- Minister of State, Petroleum Resources (Oil)
- Chairman, Nigeria Revenue Service
- Special Adviser to the President on Energy
- Director-General, Budget Office of the Federation (secretariat)
- Representative from the Ministry of Justice
Expected Impact
The reforms aim to:
- Increase net oil and gas revenue inflows to the Federation Account.
- Eliminate duplicative and overlapping deductions under the PIA and NNPCL framework.
- Enhance transparency, fiscal discipline, and resource allocation for national priorities such as security, education, healthcare, and energy transition.
- Reposition NNPCL as a fully commercial operator free from conflicting regulatory and fiscal responsibilities.
President Tinubu also announced a comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address fiscal and structural anomalies, ensuring that Nigeria’s oil and gas sector delivers maximum benefit to its citizens.
