Tinubu Issues Order for Direct Remittance of Oil and Gas Revenue to Federation Account

President Bola Tinubu has signed an Executive Order that requires oil and gas revenues to be directly deposited into the Federation Account.

The directive's purpose is to enhance revenue security, minimize unnecessary expenditures, and remove overlapping structures in the oil and gas sector.

This information was made public by Mr. Bayo Onanuga, the Presidential Spokesperson, during a statement released on Wednesday in Abuja.

The President's order was enacted under Section 5 of the Constitution of the Federal Republic of Nigeria.

It is based on Section 44(3) of the Constitution, which grants the Federal Government ownership and control over mineral resources.

Tinubu emphasized that this measure is designed to reinstatement the constitutional revenue rights of the three tiers of government, which were removed in 2021 by the Petroleum Industry Act (PIA).

He highlighted that the PIA had established structural and legal frameworks that resulted in significant revenue losses for the Federation due to various deductions, charges, and fees.

Currently, under the PIA, NNPC Limited holds on to 30 percent of the Federation’s oil revenues as management fees on Profit Oil and Profit Gas.

Furthermore, the company keeps another 20 percent of its profits to sustain working capital and future investments.

Tinubu criticized the additional 30 percent management fee, arguing it is unwarranted, given the already established 20 percent retention.

Additionally, he noted that NNPC Ltd. also retains 30 percent of its profit oil and profit gas as part of the Frontier Exploration Fund per Sections 9(4) and 5 of the PIA.

Tinubu warned that this fund risks accumulating excessive idle cash and promoting inefficient exploration expenditures.

The order also targets the Midstream and Downstream Gas Infrastructure Fund (MDGIF) created by Section 52(7)(d) of the PIA, which is financed through penalties for gas flaring, despite the existence of an Environmental Remediation Fund established under Section 103 of the PIA.

He stated that the funds and deductions in place exceed international standards and divert over two-thirds of potential remittances from the Federation Account.

The Executive Order seeks to resolve this issue by addressing overlapping legal provisions and regulatory frameworks.

Its goal is to eradicate excessive layers of deductions that diminish the funds allocated to the Federation Account.

The President also expressed concerns regarding NNPC Limited's ongoing role as a concessionaire under Production Sharing Contract arrangements.

He mentioned that this scenario results in competitive imbalances and hampers NNPC Ltd.’s transition to a fully commercial entity.

Tinubu outlined that the order includes immediate strategies aimed at preventing revenue leakages, enhancing transparency, and re-establishing NNPC Ltd. as a strictly commercial organization.

He emphasized the urgency of these reforms in light of their effects on national budgeting, debt sustainability, and overall economic stability.

Additionally, Tinubu committed to conducting a thorough review of the PIA in partnership with stakeholders.

The order specifies that NNPC Ltd. is no longer permitted to manage the 30 percent allocated to the Frontier Exploration Fund.

Instead, the 30 percent of profit oil and gas currently designated for this fund will be redirected to the Federation Account.

Moreover, NNPC Limited will no longer be eligible for the 30 percent management fee on profit oil and profit gas revenues.

From February 13, all operators and contractors involved in production sharing contracts are required to pay royalty oil, tax oil, profit oil, profit gas, and other interests directly to the Federation Account.

Tinubu has also halted the payment of gas flare penalties into the MDGIF.

All proceeds from penalties levied on operators for gas flaring must be directed to the Federation Account.

The order mandates that all expenditures from the MDGIF must adhere to relevant public procurement laws and regulations.

Tinubu has endorsed the formation of a joint project team tasked with executing integrated petroleum operations.

This team will act as an intermediary with licensees and lessees, focusing on fully merging upstream and midstream operations.

Additionally, he authorized the creation of an Implementation Committee responsible for overseeing the coordinated enforcement of this order.

This committee will include the Minister of Finance, the Attorney-General of the Federation, the Minister of Budget and National Planning, and the Minister of State for Petroleum Resources, among others.