President Bola Tinubu has ordered the immediate stoppage of management and frontier exploration fees being deducted by the Nigerian National Petroleum Company Limited (NNPCL), and payment henceforth of the fees and other revenues by the company directly to the Federation Account.
The directive, which was conveyed to the management of the state-controlled oil company in a new Executive Order signed last week, was made public 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 end sundry practices that had in the past reduced revenue inflows into the Federation Account.
Under the new framework, taxes, royalties, and profit oil from Production Sharing Contracts (PSCs) must now be remitted directly to the Federation Account and effectively block deductions by the NNPCL at revenue source.
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Similarly, the Executive Order, which is aimed at restoring transparency and boosting oil revenues due to the Federation, also suspends NNPC’s collection of management fees, halts frontier exploration deductions and stops gas flare penalty payments into the Midstream Gas Infrastructure Fund.
The order further clarifies regulatory roles between the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and established an inter-agency implementation committee, chaired by the Minister of Finance and Coordinating Minister of the Economy, to oversee its implementation.
The ministry stated that the Executive Order reinforced the 1999 Constitution, which vested ownership of mineral resources in the Federation and mandated that all revenues derived from them be paid into the Federation Account for appropriation.
Top ministry officials noted 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 ministry stated that the Executive Order had become imperative in the face of declining oil and gas receipts, despite improved production levels and relatively favourable global prices.
It clarified: “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.
The order was sequel to available information from the Federation Account Allocation Committee (FAAC) that the NNPCL deducted N318.05 billion between January and August 2025 for frontier oil explorations.
Under the PIA framework, 30 percent of PSCs profits are usually set aside monthly by the company for frontier exploration, with another 30 percent allocated as management fees.
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.
It would be recalled that the President had earlier directed the Economic Management Team, chaired by Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, to review the 30 percent management and 30 percent frontier exploration allocations and propose reforms.
The new Executive Order takes immediate effect and is described by the ministry as an interim corrective measure pending legislative amendments to entrench the changes in the PIA.
Analysts believe that if fully implemented, the ongoing fiscal reforms, especially the new Executive Order, could boost net oil receipts flowing into the Federation Account and positively impact revenue distributions to the three tiers of government in the months ahead.
