President Bola Tinubu has signed a sweeping Executive Order aimed at safeguarding and enhancing oil and gas revenues accruing to the Federation, curbing fiscal leakages, dismantling duplicative structures within the petroleum sector, and redirecting resources toward critical national priorities.
The directive, signed pursuant to Section 5 of the Constitution of the Federal Republic of Nigeria (as amended), was disclosed in a statement issued on Wednesday by the President’s Special Adviser on Information and Strategy, Mr. Bayo Onanuga.
Constitutional Basis and Rationale
The Executive Order is anchored on Section 44(3) of the Constitution, which vests ownership and control of all minerals, mineral oils, and natural gas—onshore and offshore, including Nigeria’s territorial waters and Exclusive Economic Zone—in the Government of the Federation.
According to the Presidency, the reform seeks to restore the constitutional revenue entitlements of the Federal, State, and Local Governments, which were significantly altered under the framework of the Petroleum Industry Act (PIA). The current statutory architecture, it argued, created multiple fiscal deductions and retention mechanisms that substantially reduced net remittances to the Federation Account.
Key Fiscal Adjustments
Under the existing PIA regime, NNPC Limited retains:
- 30% of Profit Oil and Profit Gas derived from Production Sharing Contracts (PSCs), Profit Sharing Contracts, and Risk Service Contracts as a management fee;
- 20% of its profits for working capital and future investments;
- An additional 30% of Profit Oil and Profit Gas allocated to the Frontier Exploration Fund pursuant to Sections 9(4) and (5) of the PIA.
The Federal Government maintains that the layered retention structure far exceeds global benchmarks and effectively diverts more than two-thirds of potential oil and gas revenues away from the Federation Account. It further contends that the existing 20% profit retention is sufficient to support NNPC Limited’s operational obligations, rendering the additional 30% management fee redundant.
Concerns were also raised regarding the Frontier Exploration Fund, described as disproportionately large and oriented toward speculative exploration activities. The administration argues that such allocations risk accumulating idle balances and encouraging inefficient capital deployment at a time of pressing fiscal demands in security, education, healthcare, and energy transition investments.
Gas Flare Penalties and Overlapping Funds
The Executive Order also addresses structural overlaps between the Midstream and Downstream Gas Infrastructure Fund (MDGIF) and the Environmental Remediation Fund established under Section 103 of the PIA.
While the MDGIF is funded partly through gas flare penalties to support remediation and relief for affected communities, Section 103 of the PIA already establishes a dedicated Environmental Remediation Fund—administered by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC)—for precisely that purpose, financed by mandatory lessee contributions.
The Presidency described this arrangement as duplicative and fiscally inefficient.
Major Directives Under the Order
The Executive Order introduces the following measures, effective February 13, 2026:
- Termination of Frontier Exploration Retention:
NNPC Limited will no longer collect or manage the 30% Frontier Exploration Fund. All such revenues from PSCs, Profit Sharing, and Risk Service Contracts are to be remitted directly to the Federation Account. - Abolition of the 30% Management Fee:
The 30% management fee on Profit Oil and Profit Gas previously retained by NNPC Limited is discontinued. These revenues shall accrue fully to the Federation Account. - Direct Remittance by Contractors:
All operators and contractors under Production Sharing Contracts are required to pay Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and any other government entitlements directly into the Federation Account. - Reallocation of Gas Flare Penalties:
Payments of gas flare penalties into the MDGIF are suspended. All proceeds from such penalties will henceforth be paid into the Federation Account. Any MDGIF expenditure must comply strictly with extant public procurement laws and regulations. - Structural Realignment of NNPC Limited:
The President identified inherent conflicts in NNPC Limited’s dual role as concessionaire and commercial operator under PSC arrangements. The Order seeks to eliminate competitive distortions and reposition the company strictly as a commercial enterprise, consistent with the PIA’s reform objectives.
Governance and Implementation
To ensure coordinated execution, the President has constituted an Implementation Committee comprising:
- 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
- The Minister of State, Petroleum Resources (Oil)
- The Chairman, Nigeria Revenue Service
- A representative of the Ministry of Justice
- The Special Adviser to the President on Energy
- The Director-General, Budget Office of the Federation (serving as Secretariat)
Additionally, a joint project team has been approved to facilitate integrated petroleum operations, with the Commission acting as interface with licensees and lessees where upstream and midstream activities are consolidated.
Strategic Implications
President Tinubu described the reforms as urgent and foundational to national budgeting, debt sustainability, macroeconomic stability, and the broader welfare of Nigerians. He further signaled a forthcoming comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address identified fiscal and structural distortions.
The Executive Order has been officially gazetted and takes immediate effect.
