In order to protect and increase the Federation’s oil and gas earnings, reduce unnecessary spending, do rid of redundant systems in this vital area of the national economy, and reallocate funds for the benefit of Nigerians, President Bola Tinubu has issued an executive order.
In accordance with Section 5 of the Federal Republic of Nigeria’s Constitution (as modified), the President signed the EO.
Section 44(3) of the Constitution serves as the foundation for the Executive Order. It grants the Government of the Federation ownership, control, and derivative rights over all minerals, mineral oils, and natural gas in, under, and upon any land in Nigeria, including its territorial waters and Exclusive Economic Zone.
The directive aims to reinstate the federal, state, and local governments’ constitutional revenue entitlements that were taken away by the Petroleum Industry Act (PIA) in 2021. Through deductions, various charges, and fees, the PIA established legal and structural avenues through which significant Federation revenues are lost.
As a management charge on Profit Oil and Profit Gas from Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts, NNPC Limited keeps 30% of the Federation’s oil revenues under the existing PIA structure.
Furthermore, the business keeps 20% of its earnings for future investments and working capital.
Since the retained earnings are already enough to finance the operations NNPCL carries out under these contracts, the Federal Government deems the extra 30% management charge to be unjustified given the current 20% retention.
In accordance with sections 9(4) and (5) of the PIA, NNPC Limited additionally keeps an additional 30% of its oil and gas profits under the production sharing, profit sharing, and risk service contracts as the Frontier Exploration Fund. At a time when government resources are desperately needed for fundamental national priorities like security, education, healthcare, and energy transition investments, a fund of this size dedicated to speculative exploration runs the risk of building up sizable idle cash balances that would encourage inefficient exploration spending.
There is also the Midstream and Downstream Gas Infrastructure Fund (MDGIF) under Section 52(7)(d) PIA, funded by the collection of gas flaring penalties provided under Section 104. The fund will be utilized to help host communities affected by gas flaring and to promote environmental remediation. However, a special Environmental Remediation Fund, run by NUPRC, has already been established under section 103 of the PIA to finance the restoration of communities that have been adversely affected by upstream petroleum operations, such as gas flaring. Additionally, lessees are already required by Section 103 to pay a charge to contribute to this fund specifically for this purpose.
More than two-thirds of possible remittances are effectively diverted to the Federation Account by all of these deductions, which greatly above international standards. Under the existing PIA architecture, these deductions and disjointed oversight are mostly to blame for the ongoing fall in net oil revenue inflows.
The Executive Order aims to resolve, among other things, the duplicative 30 per cent deduction for profit-sharing arrangements by addressing overlapping and redundant provisions across all relevant laws and regulatory instruments within the PIA framework and NNPC Limited’s governing structure. The goal is to remove unnecessary layers of deductions that reduce the amount of money that should flow into the Federation Account so that the three levels of government may focus on important national issues.
The President has recognized fundamental issues with NNPC Limited’s continued concessionaire status under the terms of the Production Sharing Contract. Its transformation into a completely commercial operator as intended by the PIA is hampered by the current framework, which permits the company to affect operational expenses while still acting as a commercial organization. It also raises the possibility of competitive distortions.
In order to protect the Federation’s interests, the Executive Order enacts immediate actions to stop leaks, improve transparency, get rid of redundant structures, and reposition NNPC Limited only as a commercial concern.
The President confirmed in issuing the order that the reforms are urgently needed by the country because of their effects on national budgeting, debt sustainability, economic stability, and Nigerians’ general well-being.
In order to resolve the budgetary and structural irregularities that have been revealed, President Tinubu stated that his administration will also conduct a thorough review of the Petroleum Industry Act in cooperation with pertinent parties.
The 30% Frontier Exploration Fund will no longer be collected and managed by NNPC Limited in accordance with the Presidential Executive Order, which has been formally gazetted. NNPC Limited will make sure that the Federation Account receives the 30% profit from oil and gas from production sharing, profit sharing, and risk service contracts that are currently designated for the frontier exploration fund.
Additionally, NNPC Limited will no longer be eligible to receive the 30% management fee on oil and gas profits that are supposed to go to the federation account.
Similarly, as of February 13, 2026, the date of the Executive Order, all operators/contractors of oil and gas assets held under a production sharing contract are required to pay Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and any other interest that may be owed to the Federation Government directly to the Federation Account.
Additionally, President Tinubu has halted the Gas Flare Penalty payments to the Midstream and Downstream Gas Infrastructure Fund. Beginning on the date of the Executive Order, the Commission will stop paying the money collected from operators who are fined for flaring gas into the Midstream and Downstream Gas Infrastructure Fund (MDGIF) and instead transfer the money to the Federation Account. All MDGIF expenditures must adhere to current public procurement rules, standards, and regulations.
President Tinubu has approved the constitution of a joint project team to execute integrated petroleum operations. When it comes to integrated operations—where upstream and midstream petroleum operations are completely integrated—the Commission will act as the liaison between licensees and lessees.
An Implementation Committee was established with President Tinubu’s approval to supervise and guarantee the executive order’s efficient, well-coordinated execution. The Attorney-General of the Federation and the Minister of Justice, the Minister of Budget and National Planning, the Minister of State, Petroleum Resources (Oil), the Minister of Finance, and the Coordinating Minister of the Economy are among the committee members. The Chairman of the Nigeria Revenue Service, a representative from the Ministry of Justice, the Special Advisor to the President on Energy, and the Director-General of the Federation’s Budget Office are additional members of the Committee. In a statement, presidential spokesperson Bayo Onanuga said the latter will supply a secretariat for the committee.
