Nigerian President Bola Tinubu has issued an Executive Order requiring direct remittance of oil and gas revenues to the country’s Federation Account.
The order, according to the statement issued by Presidential Spokesperson, Mr Bayo Onanuga, is to safeguard and enhance revenues, curb wasteful spending and eliminate duplicative structures in the sector.
The order, signed by President Tinubu is in pursuant to Section 5 of the Constitution of the Federal Republic of Nigeria (as amended) and it is anchored on Section 44(3) of the Constitution, which vests ownership and control of mineral resources in the Federal Government of Nigeria.
Tinubu said that the directive sought to restore constitutional revenue entitlements of the three tiers of government removed in 2021 by the Petroleum Industry Act (PIA).
He said the PIA created structural and legal channels through which substantial Federation revenues were lost through deductions, charges and fees.
Under the current PIA framework, the Nigerian National Petroleum Company Limited (NNPCL) retains 30 per cent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas.
He explained that the NNPCL also retained 20 per cent of its profits to cover working capital and future investments and that the additional 30 per cent management fee was unjustified, given the existing 20 per cent retention.
He said that NNPC Ltd. also retained another 30 per cent of its profit oil and profit gas as the Frontier Exploration Fund under sections 9(4) and (5) of the PIA.
According to Tinubu, the fund risked accumulating idle cash balances and encouraging inefficient exploration spending and that the order also addressed the Midstream and Downstream Gas Infrastructure Fund (MDGIF) created under Section 52(7)(d) of the PIA.
The MDGIF is funded by gas flaring penalties, even though the PIA already established an Environmental Remediation Fund under Section 103.
He said the overlapping funds and deductions far exceeded global norms and effectively divert more than two-thirds of potential remittances.
Tinubu said the Executive Order would resolve duplicative deductions by addressing overlapping provisions across relevant laws and regulatory instruments.
According to him, the objective is to eliminate multiple layers of deductions that erode revenues meant for the Federation Account.
Tinubu said the order introduced immediate measures to curb leakages, enhance transparency and reposition NNPC Ltd. strictly as a commercial enterprise.
He said the reforms were urgent given their implications for national budgeting, debt sustainability and economic stability.
Tinubu said his administration would also undertake a comprehensive review of the PIA in consultation with stakeholders.
According to the order, NNPC Ltd. will no longer collect and manage the 30 per cent Frontier Exploration Fund.
It said the 30 per cent profit oil and gas currently earmarked for the fund must henceforth be transferred to the Federation Account.
The order also states that NNPC Limited will no longer be entitled to the 30 per cent management fee on profit oil and profit gas revenues.
All operators and contractors under production sharing contracts must, from Feb. 13, pay royalty oil, tax oil, profit oil, profit gas and other interests directly to the Federation Account.
Tinubu, however, suspended payments of gas flare penalties into the MDGIF.
Proceeds from all penalties imposed on operators for gas flaring must be paid into the Federation Account.
The order directs that all expenditure from the MDGIF must comply with extant public procurement laws, policies and regulations.
Tinubu approved the constitution of a joint project team to execute integrated petroleum operations.
The Commission will serve as interface with licensees and lessees where upstream and midstream operations are fully combined.
The President also approved the establishment of an Implementation Committee to oversee coordinated execution of the order.
GIK/APA