THE Accountability Lab Nigeria said the recently signed Executive Order on oil and gas revenues remittance would undermine contributions to Host Community Development Trusts (HCDT).
President Bola Tinubu had on February 18 signed the executive order directing the Nigerian National Petroleum Company Limited (NNPC) to remit oil and gas revenues directly to the federation account. This move seeks to boost government earnings, block leakages, and strengthen oversight in Nigeria’s petroleum sector.
The president further directed that all operators and contractors must pay royalty oil, tax oil, profit oil, profit gas, and other government entitlements directly to the federation account.
According to the order, NNPC will no longer collect the 30 per cent management fee and the 30 per cent frontier exploration fund deductions from profit oil and profit gas.
The order suspended the payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund, with proceeds going directly to the federation account.
Reacting to this development, the Accountability Lab Nigeria, in a statement issued on Wednesday, March 4, by its Country Director, Friday Odeh, said that with the order, the Petroleum Industry Act (PIA), which enshrines a statutory mechanism for channeling three per cent of the operator’s annual expenditure into community-defined development priorities, could experience upset, leading to service delivery disruptions.
It stressed that the HCDT were conceived to provide stable, predictable funding for communities impacted by oil and gas operations and community-driven development.
It was also established to support planning, implementation and a mechanism for reducing conflict and enhancing local accountability, the organisation said.
The Accountability Lab Nigeria argued that while the order did not abolish HCDT, its revenue centralisation could undermine the structural logic that sustains it.
“When major revenue streams are folded into the central account without dedicated safeguards for community funds, there’s a risk that HCDT will be viewed as optional or duplicative. This could weaken enforcement and operator commitment.
“Direct remittance to the federation account subjects all petroleum revenues, including those that effectively fund community obligations, to the annual budgetary cycle. This can diminish the predictability and community inflows,” it added.
It stated that further that the net effect could be that HCTDs, while legally intact, become administratively weakened and vulnerable to underfunding.
The organisation suggested that the executive order signaled a broader review of the PIA for statutory protection of HCTD which could include a ring-fencing mechanism that ensures statutory triggers that ensures timely, predictable Trust funding.
Notably, one of the most consequential changes in the order is the suspension of payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund (MDGIF).
Under Section 52 of the PIA, this fund was intended, in part, to finance infrastructure and environmental mitigation related to gas activities. At the same time, Section 103 of the PIA established an Environmental Remediation Fund under the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) with operator contributions tied to environmental harm.
Against this backdrop, Accountability Lab argued that redirecting flare penalties into the federation account would disrupt the polluter pays principle, undermining the causal link between environmental harm and financing its mitigation.
The organisation emphasised that the order would make remediation funding subject to annual budget negotiations, rather than automatic allocation, and weakens public traceability of environmental expenditures.
This shift, though fiscally motivated, risks weakening environmental justice frameworks designed to ensure that companies pay for remediation and communities receive compensation for damage incurred.
It stressed the importance of amendment of the PIA provisions to maintain the connection between environmental penalties and remediation financing.
Under the executive order, all taxes, royalties and profits under Production Sharing Contracts (PSCs) are to be fully remitted to the federation account, effectively blocking deductions at source by the national oil company.
The Presidency said the decision would safeguard and enhance oil and gas revenues for the federation, curb wasteful spending, and eliminate duplicative structures in the oil and gas sector.
According to the order, which has been officially gazetted, the NNPC will no longer collect and manage the 30 per cent frontier exploration fund.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.