Nick Agule: Tinubu's Executive Order 9 Represents Major Reform

Energy analyst Nick Agule has characterized President Bola Tinubu’s Executive Order 9 regarding the direct remittance of oil revenues to the Federation Account as possibly the most crucial reform of his administration. He maintained that this move reinstates constitutional order and terminates the illegal redirection of revenue meant for the federation.

In a discussion with ARISE News on Friday, Agule endorsed the President's decision to mandate that all oil revenues owed to the federation be deposited into the Federation Account in accordance with the Constitution.

"The president's choice to issue Executive Order 9 aligns with constitutional directives," he stated.

To clarify, Agule described the federation as the collective of the three tiers of government: the federal, state, and local governments, emphasizing the distinction between the federation itself and the federal government.

Referencing Section 162(1) of the 1999 Constitution (as amended), he noted, "This section specifies that all revenues accruing to the federation must be channeled to the federation account, which is a clear constitutional requirement."

He contended that certain aspects of the Petroleum Industry Act (PIA) 2021 violate this constitutional stipulation.

"Essentially, what the PIA did was to capture federation revenues on their path to the federation account by placing them into separate compartments that fell beyond the oversight of the three government tiers," he explained.

He pointed out that the Act permits a 30 percent deduction as a management fee from profit oil on production sharing contracts, another 30 percent for the Frontier Exploration Fund, and 10 percent from rents associated with petroleum prospecting and mining licenses — all before the funds are sent to the Federation Account.

Agule expressed concerns about the management fee, questioning: "Since you aren't the entity extracting the oil, which is done by international oil corporations like Shell in Bonga under production sharing agreements, how can you justify a 30 percent management fee? What aspect are you managing?"

He stressed that profit oil extracted on behalf of the federation must first be deposited into the Federation Account before any disbursement can occur.

"This profit oil must be funneled into the federation account initially. Once there, we can proceed with appropriations. This is the correct procedure, as he affirmed."

Regarding frontier exploration funding, Agule mentioned that the executive order does not preclude ongoing investments.

"The president can utilize funds from the federation account to negotiate with other subnational authorities — that’s the federal government having discussions with state governments — on how to approach frontier exploration. If a consensus is reached to continue funding, it can proceed at an agreed- upon percentage, which could range from 5 to 10 percent, depending on what the three government levels consent to."

On the implications for the Nigerian National Petroleum Company Limited (NNPCL), Agule stated that the company must now function as a genuine commercial entity.

"In my view, this Executive Order 9 represents perhaps the most significant reform of Tinubu's administration. The NNPCL is now operating as a business entity," he asserted.

He elaborated that unlike private companies such as Chevron, Mobil, Shell, and Total, NNPCL should not depend on federation revenues for its operational costs.

"This executive order gives the NNPCL the directive: become a true commercial enterprise as outlined by the PIA. You can no longer rely on government support; it's time to become self-sufficient," he emphasized.

Agule argued that if NNPCL's revenues do not cover its expenses, it must either enhance revenue generation or implement cost-cutting measures.

"If their revenues fall short of operational costs, companies like Chevron or Shell take action. They will find ways to boost their revenue or reduce their spending. The NNPCL needs to adopt a similar approach," he noted.

He criticized the practice of paying refinery staff despite extended inactivity.

"As it stands, NNPCL has been compensating refinery employees for up to 20 years without a single barrel of crude oil being refined. They have utilized the 30 percent management fee taken from the federation account to cover these salaries," he stated.

"With the removal of such funds, they must either reactivate refineries to generate revenue or cease operations and notify employees that funding is no longer available. This is the reality for a commercial organization."

While he recognized that redirecting funds to the Federation Account is just the first phase, Agule underlined the importance of maintaining accountability in public expenditure.

"You're correct that this is only the beginning: getting funds into the account. The next phase involves determining how to manage the funds effectively," he remarked.

"Government reforms should not conclude with just transferring petroleum revenues into the account; it should also include ensuring accountability in using these funds, which remains a task for the president."

He urged for strict compliance with the rule of law.

"Everyone in Nigeria must be held accountable under the law. This adherence will propel Nigeria towards becoming a developed nation swiftly," he asserted, reiterating the president’s crucial role in upholding legal standards.

Agule also encouraged President Tinubu to revisit the treatment of joint venture assets, claiming they were wrongly consolidated into the NNPCL’s financial records.

"The president has made progress, but there's additional work to be done regarding joint venture assets," he stated.

"The NNPCL's CFO acknowledged in front of a National Assembly panel that prior to the PIA, these joint venture assets belonged to the federation. Yet, they are now considered NNPCL assets after the PIA, despite no such provision in the Act."

"What justifies the NNPCL's inclusion of joint venture assets into its financial records to pay employees who are not contributing?"

He continued: "President Tinubu, please ensure that the NNPCL does not keep these joint venture assets without properly reclaiming them."

Agule's remarks come amidst rising discussions on the executive order’s ramifications regarding revenue transparency, allocations to subnational entities, and the future commercial operations of the state oil company.