President Bola Ahmed Tinubu has signed a sweeping Executive Order that significantly reduces revenue deductions by NNPC Limited, directing billions of naira back to the Federation Account in what officials describe as a major fiscal reset in Nigeria’s oil and gas sector.
The order, signed pursuant to Section 5 of the 1999 Constitution (as amended), seeks to restore revenue entitlements of the federal, state and local governments by eliminating what the Presidency called “duplicative and unjustified deductions” under the Petroleum Industry Act.
30% Management Fee Scrapped
Under the current framework of the Petroleum Industry Act (PIA), NNPC Limited 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 (PSCs), Profit Sharing Contracts, and Risk Service Contracts.
In addition, the national oil company keeps 20 per cent of its profits for working capital and future investments.
The Federal Government argued that the additional 30 per cent management fee is unjustified, given the existing 20 per cent profit retention. The Executive Order therefore abolishes NNPC Limited’s entitlement to the 30 per cent management fee on profit oil and gas revenues meant for the Federation Account.
Frontier Exploration Fund Halted
The order also terminates NNPC Limited’s management of the 30 per cent Frontier Exploration Fund established under Sections 9(4) and (5) of the PIA.
Under the new directive, the 30 per cent share of profit oil and gas previously earmarked for frontier exploration will now be transferred directly to the Federation Account.
Officials said the fund, designed to finance speculative oil exploration in frontier basins, risked accumulating large idle cash balances at a time when government resources are urgently required for security, healthcare, education, and energy transition priorities.
Gas Flare Penalties Redirected
President Tinubu also suspended payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund (MDGIF).
Henceforth, all proceeds from gas flaring penalties will be paid directly into the Federation Account. Expenditure from the MDGIF, where applicable, must now comply strictly with public procurement laws and regulations.
The Presidency noted that Section 103 of the PIA had already created a separate Environmental Remediation Fund administered by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), raising concerns about overlapping mandates and duplication.
Direct Payment to Federation Account
Effective February 13, 2026, all operators and contractors under Production Sharing Contracts are required to remit Royalty Oil, Tax Oil, Profit Oil, Profit Gas and any other government-entitled revenues directly to the Federation Account.
The government said the move is aimed at blocking revenue leakages and eliminating fragmented oversight structures that have contributed to declining net oil revenue inflows.
Structural Repositioning of NNPC
Beyond fiscal adjustments, the Executive Order addresses structural concerns about NNPC Limited’s dual role as both concessionaire and commercial operator under PSC arrangements.
The Presidency said the existing framework allows the company to influence operating costs while functioning as a commercial entity, creating potential competitive distortions and undermining its transition into a fully commercial enterprise as envisaged under the PIA.
Under the new framework, NNPC Limited is to be repositioned strictly as a commercial operator, while safeguarding the Federation’s ownership rights over petroleum resources as provided under Section 44(3) of the Constitution.
Implementation Committee Constituted
To oversee the execution of the reforms, President Tinubu approved the establishment of an Implementation Committee comprising the Minister of Finance and Coordinating Minister of the Economy, the Attorney-General of the Federation, the Minister of Budget and National Planning, the Minister of State for Petroleum Resources (Oil), the Chairman of the Nigeria Revenue Service, the Special Adviser to the President on Energy, and the Director-General of the Budget Office, who will serve as secretariat.
The President described the reforms as being of urgent national importance, citing their implications for national budgeting, debt sustainability and economic stability.
He also announced plans for a comprehensive review of the Petroleum Industry Act in consultation with stakeholders to address fiscal and structural anomalies identified since its enactment in 2021.
With the new Executive Order, the Federal Government expects a significant increase in remittances to the Federation Account, potentially altering the revenue outlook for 2026 and beyond.
