PRESIDENT Bola Tinubu has signed an executive order on direct remittance of oil and gas revenues to the Federation Account Allocation Committee (FAAC).
By this order, all taxes, royalties and profits under Production Sharing Contracts (PSCs) are to be fdully remitted to the federation account, effectively blocking deductions at source by the national oil company.
The decision was disclosed in a statement issued on Wednesday, February 18, by presidential spokesperson, Bayo Ononuga,
The executive order, the Presidency said, will 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.
“NNPC Limited will ensure that the 30 per cent profit from oil and gas from production sharing, profit sharing, and risk service contracts currently earmarked for the frontier exploration fund is henceforth transferred to the Federation Account,” the Presidency said.
It added, “NNPC Limited will no longer be entitled to the 30 per cent management fee on profit oil and profit gas revenues, which should go to the federation account.
“In the same vein, all operators/contractors of oil and gas assets held under a production sharing contract shall, from the date of the Executive Order, which is February 13, 2026, pay royalty oil, tax oil, profit oil, profit gas, and any other interest howsoever described which is due to the government of the federation directly to the Federation Account.”
The Presidency said Tinubu had also suspended payments of the gas flare penalty into the midstream and downstream gas infrastructure fund.
“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 president, according to the statement, signed the order in pursuance of Section 5 of the Constitution of the Federal Republic of Nigeria (as amended).
“The Executive Order is 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 noted further.
More revenue accruals to the federation account
According to the Presidency, 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 said the PIA created structural and legal channels through which substantial federation revenues “are lost through deductions, sundry charges, and fees”.
“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 company retains 20 per cent of its profits to cover working capital and future investments. Given the existing 20 per cent retention, the additional 30 per cent 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.
“NNPC Limited also retains another 30 per cent 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.”
According to the statement, a fund of this size, being devoted to “speculative exploration”, could build up idle cash and encourage inefficient exploration spending, diverting resources from urgent national priorities like security, education, healthcare, and the energy transition.
“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,” it said, stressing that “The fund is to be used for supporting environmental remediation and relief for host communities impacted by gas flaring.
The Presidency, however, observed that Section 103 of the PIA had 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.”
All the deductions, the Presidency said, far exceed global standards, diverting over two-thirds of potential remittances to the federation account.
The Presidency said the ongoing decline in net oil revenue inflows was largely due to these deductions and the fragmented oversight structure under the current PIA framework.
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.