Executive directive mandates direct remittance of taxes and royalties to the Federation Account, tightens oversight of oil cash flows under the Petroleum Industry Act….
President Bola Tinubu has ordered the immediate suspension of management and frontier exploration fees previously deducted by the Nigerian National Petroleum Company Limited (NNPC Ltd.), in a sweeping move aimed at restoring transparency and boosting oil revenues due to the Federation.
The directive, contained in a new Executive Order signed last week, was disclosed on Wednesday in a statement issued by the Federal Ministry of Finance.
According to the ministry, the order seeks to realign oil and gas revenue administration with constitutional provisions and halt practices that have weakened inflows into the Federation Account.
Direct Remittance, No More Deductions at Source
Under the new framework, taxes, royalties and profit oil from Production Sharing Contracts must now be remitted directly to the appropriate fiscal authorities. The move effectively blocks deductions at source, a practice that had allowed significant portions of oil proceeds to be retained before reaching the Federation Account.
The order also:
- Suspends NNPC’s collection of management fees
- Halts frontier exploration deductions
- Stops gas flare penalty payments into the Midstream Gas Infrastructure Fund
- Clarifies regulatory roles between the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority
An inter-agency implementation committee, chaired by the Minister of Finance and Coordinating Minister of the Economy, has been established to oversee execution.
Constitutional Backing
The ministry said the Executive Order reinforces the 1999 Constitution, which vests ownership of mineral resources in the Federation and mandates that all revenues derived from them be paid into the Federation Account for appropriation.
Officials argued that fiscal and structural arrangements introduced under the Petroleum Industry Act (PIA) 2021 had resulted in off-budget allocations and revenue deductions that diluted federal inflows.
The action, the ministry said, became urgent due to declining oil and gas receipts despite improved production levels and relatively favourable global prices.
“This shortfall has constrained the government’s capacity to meet budgetary obligations and finance critical public investments in education, healthcare and infrastructure,” the statement noted.
Billions in Deductions
The development follows revelations that NNPC received N318.05 billion between January and August 2025 for frontier oil exploration, based on documents from the Federation Account Allocation Committee.
Under the PIA framework, 30 percent of Production Sharing Contract profits had been set aside monthly for frontier exploration, with another 30 percent allocated as management fees, a structure that critics say significantly reduced distributable revenues.
The Director-General of the Budget Office of the Federation had previously disclosed that Nigeria was losing nearly 60 percent of gross oil revenue to such deductions, prompting calls for legislative amendments.
President Tinubu had earlier directed the Economic Management Team, chaired by Finance Minister Wale Edun, to review the 30 percent management and 30 percent frontier exploration allocations and propose reforms.
A Shift in Oil Revenue Governance
The new Executive Order takes immediate effect and is described as an interim corrective measure pending legislative amendments to entrench the changes in law.
Analysts say the decision signals tighter federal oversight of oil revenue administration and could fundamentally reshape NNPC’s funding model, cost recovery mechanisms and cash flow structure under the PIA regime.
At a time of mounting domestic fiscal pressures and intensifying global competition for energy capital, the government insists Nigeria can no longer afford inefficiencies in managing its most strategic economic asset.
If fully implemented, the reforms could significantly increase net oil receipts flowing into the Federation Account altering revenue dynamics for federal, state and local governments in the months ahead.
About the Author
