Tinubu signs Executive Order to end NNPC’s 30% oil revenue cuts

By Peter Egwuatu

PRESIDENT Bola Tinubu, yesterday, signed an Executive Order (EO) to boost oil and gas revenues flowing into Nigeria’s Federation Account by eliminating wasteful deductions under the Petroleum Industry Act (PIA).

According to the statement issued by the Presidential spokesman, Bayo Onanuga, the Executive Order is anchored on Section 44(3) of the Constitution, which vests ownership, control, and derivative rights in all minerals, mineral oils, and natural gas in, under, and upon any land in Nigeria, including its territorial waters and Exclusive Economic Zone, in the Government of the Federation.

It explained that the directive seeks to restore the constitutional revenue entitlements of the federal, state, and local governments, which were removed 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. 

It further stated: “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.

“In addition, the company retains 20 per cent of its profits to cover working capital and future investments.

“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 profit 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.”

Continuing, it said: “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.

“All these deductions far exceed global norms and effectively divert more than two-thirds of potential remittances to the Federation Account. The continuing decline in net oil revenue inflows is largely attributable to these deductions and fragmented oversight under the current PIA architecture.

“The Executive Order aims to resolve, among other things, the duplicative 30 per cent deduction for profit-sharing arrangements by addressing overlapping and redundant provisions across all relevant laws and regulatory instruments within the PIA framework and NNPC Limited’s governing structure. 

“The objective is to eliminate unjustified multiple layers of deductions that erode revenues that ought to accrue to the Federation Account, enabling the three tiers of government to pursue critical national priorities.

“The President has identified structural concerns regarding the continued role of NNPC Limited as a concessionaire under Production Sharing Contract arrangements. The existing framework, which allows the company to influence operating costs while simultaneously functioning as a commercial entity, creates potential competitive distortions and undermines its transition into a fully commercial operator as envisioned under the PIA.

“The Executive Order, therefore, introduces immediate measures to curb leakages, enhance transparency, eliminate duplicative structures, and reposition NNPC Limited strictly as a commercial enterprise, while safeguarding the Federation’s interests.

”In rolling out the order, the President affirmed that the reforms are of urgent national importance, given their implications for national budgeting, debt sustainability, economic stability, and the overall well-being of Nigerians.”

The post Tinubu signs Executive Order to end NNPC’s 30% oil revenue cuts appeared first on Vanguard News.