President Bola Ahmed Tinubu has initiated a major restructuring of Nigeria’s petroleum governance framework through an executive directive mandating the direct remittance of all oil and gas revenues into the Federation Account. Sources within the presidency indicate that this step is only the first phase of a broader reform that will include a thorough review of the Petroleum Industry Act (PIA) to correct structural and fiscal issues identified since the law’s implementation. A senior Aso Rock official described the executive order as “the first corrective layer,” emphasizing that any structural defects undermining constitutional order or fiscal stability must be addressed.
The PIA, enacted in 2021, was originally celebrated as a landmark reform aimed at modernizing Nigeria’s petroleum sector, enhancing governance, and attracting investment. However, officials say that certain elements of its revenue model, particularly around Production Sharing Contracts (PSCs), have produced unintended financial distortions. Under the post-PIA system, only 40 percent of PSC profit oil was remitted to the Federation Account, while the remaining 60 percent was retained by the Nigerian National Petroleum Company Limited (NNPC). This retained portion was split evenly between a 30 percent management fee and a 30 percent allocation to the Frontier Exploration Fund. Financial records submitted to the Federation Account Allocation Committee (FAAC) in 2025 indicate that these retained revenues amounted to approximately N14.57 trillion.
Sources argue that these retention mechanisms created a structural imbalance between the Federation and NNPC. “When the Federation receives less than half of a major revenue stream before deductions, questions naturally arise,” a presidency adviser explained. The executive order is seen as an immediate measure to correct this imbalance while more permanent legislative solutions are considered. Legal advisers note that the directive aligns with constitutional provisions, including Sections 44(3) and 162, which vest ownership of mineral resources in the Federal Government and require all revenues accruing to the Federation to be deposited into the Federation Account. “Revenue must first enter the Federation Account before any allocation or expenditure occurs,” an Aso Rock source said. By invoking Section 5, which vests executive authority in the President, Tinubu was able to implement immediate corrective measures while paving the way for a comprehensive legislative review.
The Frontier Exploration Fund, which receives 30 percent of PSC profit oil to support exploration in frontier basins outside the Niger Delta, is expected to be a central focus of the review. While officials acknowledge the importance of expanding reserves, they argue that automatic deductions before remittance raised fiscal and constitutional concerns. “Exploration is vital for long-term energy security,” a senior official noted, “but funding mechanisms must adhere to public finance principles.” The executive order has abolished the 30 percent automatic allocation to the Frontier Exploration Fund, with future financing for exploration expected to go through transparent appropriation and legislative oversight.
Another key area under review is the operational structure of NNPC. The executive order eliminated the automatic 30 percent management fee previously retained on PSC profit oil and profit gas. Presidency insiders explain that this change reinforces NNPC’s transition from a quasi-fiscal entity to a commercial company. “NNPC must operate as a business,” one adviser remarked. “It cannot retain sovereign revenue before the Federation receives its entitlement.” Officials suggest that the forthcoming PIA review will clarify the boundaries between corporate earnings and constitutional revenue flows.
The shift from direct oil sale proceeds to reliance on dividend-based inflows under the post-PIA system also created internal debate. Dependence on dividends, which are not guaranteed, introduced fiscal uncertainty and undermined the predictability of revenue streams. “Dividends cannot replace constitutional revenue,” an official emphasized. The executive order restores direct remittance of royalty oil, tax oil, profit oil, and profit gas into the Federation Account, effectively ending the reliance on dividend substitution as a primary revenue channel.
The reforms are expected to strengthen fiscal federalism, as state and local governments, whose allocations are determined by FAAC distributions, will now benefit from a more transparent and predictable inflow of funds. “With full remittance, the Federation Account reflects true earnings,” an official familiar with FAAC proceedings explained. Presidency sources indicate that a comprehensive PIA review will further align petroleum governance with federal principles and enhance transparency across all tiers of government.
The executive order also addresses oversight and accountability for other petroleum sector funds. Gas flare penalties collected by the Nigerian Upstream Petroleum Regulatory Commission are now required to be paid directly into the Federation Account, and expenditures from the Midstream and Downstream Gas Infrastructure Fund must comply with public procurement regulations. A presidency official noted that these measures address fragmented oversight and will be reinforced by the PIA review.
An implementation committee has been established to monitor the execution of the directive, while consultations with stakeholders and legislative leaders are planned as part of the review process. “The President believes in reform through dialogue,” a senior official stated. “The goal is refinement, not disruption.” Officials emphasize that the core objectives of the PIA—attracting investment, modernizing governance, and improving sector efficiency—remain unchanged. “What we are correcting are structural weaknesses that emerged during implementation,” a senior aide clarified.
For the Tinubu administration, the executive order represents a strategic first step. “Nigeria’s petroleum framework must be both modern and constitutional,” a senior presidency official concluded. “This order restores balance, and the PIA review will consolidate these reforms for the long term.”
