FG orders remittance of oil, gas revenue to federation account

President Bola Tinubu has signed a new Executive Order aimed at protecting and increasing oil and gas revenues for the country, while also reducing wasteful spending and removing overlapping structures in the sector.

The announcement was made on Wednesday by his Special Adviser on Information and Strategy, Bayo Onanuga, who said the President acted in line with Section 5 of the Constitution of the Federal Republic of Nigeria (as amended).

According to the statement, the Executive Order is designed to strengthen government control and improve transparency in the oil and gas industry, which remains a major source of income for Nigeria.

It also seeks to redirect resources in a way that will better serve the Nigerian people.

Very Nigerian reports that the Order is based on Section 44(3) of the Constitution. The section clearly states that ownership and control of all minerals, mineral oils, and natural gas found in, under, or on any land in Nigeria, including the country’s territorial waters and Exclusive Economic Zone belong to the Government of the Federation.

According to the statement, 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.

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 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, Profit Sharing Contracts, and Risk Service Contracts.

The statement noted that given the existing 20% retention, the additional 30% 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% of its 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. A fund of this size, being devoted to speculative exploration, risks accumulating large idle cash balances, which would encourage inefficient exploration spending, at a time when government resources are urgently needed for core national priorities, including security, education, healthcare, and energy transition investments.

“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. The fund is to be used for supporting environmental remediation and relief for host communities impacted by gas flaring.

“However, section 103 of the PIA has 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,” the statement read in part.

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