By Juliet Ezeh
President Bola Tinubu has initiated a major restructuring of Nigeria’s oil revenue framework, ordering the Nigerian National Petroleum Company Limited to remit taxes, royalties and profit oil directly to the Federation Account, in a move aimed at tightening fiscal discipline and curbing revenue leakages.
The directive, contained in a newly signed Executive Order, suspends the collection of management fees and frontier exploration deductions previously retained by the NNPC under provisions of the Petroleum Industry Act. The announcement was made by the Federal Ministry of Finance, which described the action as an urgent corrective step to protect constitutionally mandated oil revenues.
Under the new order, payments that were previously deducted at source including management fees and funds earmarked for frontier exploration are to be halted. Taxes, royalties and Production Sharing Contract profit oil must now be paid directly to designated fiscal authorities, ensuring that oil and gas earnings flow transparently into the Federation Account.
The Federal Government said the reform aligns oil revenue administration with the 1999 Constitution, which vests ownership of mineral resources in the Federation and mandates that proceeds from such resources be paid into the central revenue pool for appropriation.
According to the Ministry of Finance, the decision became necessary following a sustained decline in oil and gas inflows into the Federation Account, despite improvements in crude oil production levels and relatively favourable global market conditions. The revenue shortfall has reportedly constrained the government’s ability to fund critical sectors such as education, healthcare and infrastructure.
The Executive Order also halts the payment of gas flare penalties into the Midstream Gas Infrastructure Fund and clarifies regulatory responsibilities between the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority. An inter-agency implementation committee, chaired by the Minister of Finance and Coordinating Minister of the Economy, has been established to oversee execution.
The move comes amid growing debate over the fiscal structure introduced by the Petroleum Industry Act, particularly the allocation of 30 per cent of Production Sharing Contract profits to frontier exploration and another 30 per cent as management fees to the national oil company.
Recent data from the Federation Account Allocation Committee revealed that NNPC received over N318 billion between January and August 2025 for frontier oil exploration alone. Budget Office officials have previously warned that nearly 60 per cent of Nigeria’s gross oil revenue was being lost to deductions under the existing framework.
By suspending these deductions, the Tinubu administration appears determined to reclaim a larger share of oil proceeds for direct government spending and fiscal stability. The President had earlier called for a reassessment of the 30 per cent management fee and 30 per cent frontier exploration allocation, tasking the Economic Management Team with proposing reforms.
Analysts say the Executive Order signals stronger federal oversight of oil revenue administration and could significantly reshape NNPC’s cash flow structure, particularly its cost recovery and funding mechanisms under the Petroleum Industry Act.
The government described the measure as an interim step pending legislative amendments that could permanently entrench the reforms. It added that in a competitive global energy market, Nigeria cannot afford inefficiencies in managing its most strategic economic asset.
With immediate effect, the oil and gas sector is expected to operate under tighter fiscal transparency rules, as the administration seeks to ensure that hydrocarbon resources translate into measurable economic benefits for citizens.
Juliet Ezeh is the founder and chief reporter at Westbridge Reporters with over 7 years of experience in journalism. She covers crime, industry, policy, and social developments, delivering timely and accurate reporting.