In a major move to centralize national earnings, President Bola Tinubu has signed an Executive Order that effectively strips the Nigerian National Petroleum Company Limited (NNPC) of the power to withhold significant portions of oil and gas revenues before it reaches the Federation Account.
The Executive Order, signed on February 13, and officially gazetted and announced on February 18, 2026, aims to curb what experts described as “statutory leakages” and ensure that more funds reach the Federation Account for distribution among the three tiers of government (Federal, State, and Local).
In a statement released on Wednesday, Presidential spokesman, Bayo Onanuga said the move is “to safeguard and enhance oil and gas revenues for the Federation, curb wasteful spending, eliminate duplicative structures in this critical sector of the national economy, and redirect resources for the benefit of the Nigerian people.”
Onanuga clarified that the Executive Order signed by the president was in accordance with Section 5 of the Constitution of the Federal Republic of Nigeria (as amended).
He added that the Executive Order is also anchored on Section 44(3) of the Constitution, which vests ownership, control, and derivative rights in all minerals, mineral oils, and natural gas in, under, and upon any land in Nigeria, including its territorial waters and Exclusive Economic Zone, in the Government of the Federation.
The statement explained that the directive seeks to restore the constitutional revenue entitlements of the Federal, State, and Local Governments, which were taken away in 2021 by the Petroleum Industry Act (PIA). It pointed out that the PIA created structural and legal channels through which substantial Federation revenues are lost through deductions, sundry charges, and fees.
PIA Provisions
It observed that under the current PIA framework, NNPC 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 national oil 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 Presidency stated.
“NNPC Limited also retains another 30% of its profit oil and profit gas under the production sharing, profit sharing, and risk service contracts, as the Frontier Exploration Fund under sections 9(4) and (5) of the PIA. 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.
“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 is to be used for supporting environmental remediation and relief for host communities impacted by gas flaring.
“However, section 103 of the PIA has already established a dedicated Environmental Remediation Fund, administered by NUPRC, specifically designed to fund the rehabilitation of communities negatively impacted by upstream petroleum operations, including gas flaring. Furthermore, Section 103 already imposes a fee on lessees to contribute to this fund for precisely this purpose.”
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The presidency argued that these deductions by NNPC provided for in the PIA far exceed global norms and lead to diversion of more than two-thirds of potential remittances to the Federation Account.
It blamed the continuing decline in net oil revenue inflows on the deductions and what it described as “a fragmented oversight” under the current PIA framework.
Key Provisions of Executive Order
With the new Executive Order, NNPCL will no longer retain a 30% management fee on Profit Oil and Profit Gas from Production Sharing Contracts (PSCs). The government argues that NNPC’s existing 20% profit retention for working capital is already sufficient.
“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,” the presidency stated.
Abolishing the Frontier Exploration Fund (FEF)
The directive has also scrapped the power of NNPC to collect and manage the 30% Frontier Exploration Fund. These funds must now be transferred directly to the Federation Account to prevent the accumulation of idle cash.
Direct Remittance by Operators
The EO also provides that all oil and gas operators under PSCs are now mandated to pay royalties, taxes, and profit oil/gas directly to the Federation Account, bypassing NNPC’s previous role as a collection middleman.
Redirecting Gas Flare Penalties
In line with the new directive, penalties for gas flaring, which previously went into the Midstream and Downstream Gas Infrastructure Fund (MDGIF), will now be paid directly into the Federation Account.
Analysts note that the move by the president is a significant step in reshaping Nigeria’s fiscal policy and is specifically aimed at increasing transparency (as decades of “opaque” deductions have lowered the amount of cash available for public spending.
It also helps to reposition NNPC, forcing the company to act strictly as a commercial enterprise rather than a quasi-regulator or parallel treasury; and also increase the pool of funds available to the Federation Account Allocation Committee (FAAC) at a time of high economic pressure.
The statement said the President has highlighted structural concerns regarding the continued role of NNPC Limited as a concessionaire under Production Sharing Contract arrangements.
“The existing framework, which allows the company to influence operating costs while simultaneously functioning as a commercial entity, creates potential competitive distortions and undermines its transition into a fully commercial operator as envisioned under the PIA.
“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 Commission shall, from the date of the Executive Order, pay proceeds from all penalties imposed on operators for flaring gas into the Federation Account and cease payment of such proceeds into the Midstream and Downstream Gas Infrastructure Fund (MDGIF). All expenditure from the MDGIF shall be conducted in line with extant public procurement laws, policies and regulations.”
The Nigerian leader has approved the constitution of a joint project team to execute integrated petroleum operations, with NUPRC serving as the interface with licensees and lessees in respect of integrated operations where upstream and midstream petroleum operations are fully combined.
The President also approved the establishment of an implementation committee to oversee and ensure the effective, coordinated implementation of the executive order.
The members of the committee include the Minister of Finance and Coordinating Minister of the Economy, the Attorney-General of the Federation and Minister of Justice, the Minister of Budget and National Planning and the Minister of State, Petroleum Resources (Oil).
Other members of the Committee are the Chairman, Nigeria Revenue Service; a Representative of the Ministry of Justice; the Special Adviser to the President on Energy; and the Director-General, Budget Office of the Federation. The latter will provide a secretariat to the committee.
According to the statement 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 assured that his administration will also undertake a comprehensive review of the Petroleum Industry Act in consultation with relevant stakeholders to address identified fiscal and structural anomalies.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in mass communication.
