The PUNCH also gathered exclusively that the implementation of the directive commenced in January, and its impact is expected to reflect in the revenue allocations at the FAAC meeting scheduled for next week.

Since the implementation of the PIA in 2021, the Federation Account, shared by the federal, state, and local governments, received only 40 per cent of proceeds from Production Sharing Contracts. The remaining 60 per cent was retained by the NNPC, split between a 30 per cent Frontier Exploration Fund and a 30 per cent management fee.

Under the new directive, NNPC will no longer collect and manage the statutory 30 per cent Frontier Exploration Fund, a development expected to significantly alter the revenue landscape of the oil and gas sector.

The frontier exploration fund is designed to finance hydrocarbon exploration activities in Nigeria’s frontier basins, areas outside the traditional Niger Delta producing belt, where commercial discoveries have yet to be fully established. These include: the Chad Basin in the North-East, the Sokoto Basin in the North-West, the Bida Basin in North-Central Nigeria, the Benue Trough, and parts of the Dahomey basin.

Exploration in these locations is aimed at expanding Nigeria’s reserve base, reducing regional concentration of oil production, and enhancing long-term energy security. Activities typically involve seismic data acquisition, exploratory drilling, geological studies, and appraisal campaigns.

The fund was floated under the Petroleum Industry Act because frontier basins are generally high-risk and capital-intensive, and therefore would require sustained funding considered critical to maintaining exploration momentum.

In addition, the national oil company will no longer be entitled to the 30 per cent management fee on profit oil and profit gas revenues. The order further directed that all operators and contractors of oil and gas assets under Production Sharing Contracts must now pay Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and any other government interest directly into the Federation Account.

The directive also suspended payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund, instructing the Nigerian Upstream Petroleum Regulatory Commission to remit all proceeds from penalties imposed on operators directly into the Federation Account.

It further directed that all expenditure from the Midstream and Downstream Gas Infrastructure Fund must now comply with extant public procurement laws and regulations. Tinubu said excessive deductions, overlapping funds, and structural distortions in the oil and gas sector have weakened remittances to the Federation Account, warning that the practice must end to protect national revenue.

In a post on his verified X handle, the President stated that for too long, revenues meant for federal, state, and local governments had been trapped in layers of charges and retention mechanisms, thereby slowing development across the country.

He said, “For too long, excessive deductions, overlapping funds, and structural distortions in the oil and gas sector have weakened remittances to the Federation Account. When revenues meant for federal, state, and local governments are trapped in layers of charges and retention mechanisms, development suffers. That must end.”

Tinubu emphasised that oil and gas revenues must serve Nigerians first, noting that the ongoing reforms in the sector are aimed at promoting fairness and fiscal responsibility. He added, “Oil and gas revenues must serve the Nigerian people first, and this reform is about fairness and fiscal responsibility.”

The President explained that as the government strengthens national security, invests in education, expands healthcare, stabilises the economy, and advances the country’s energy transition, every legitimate revenue due to the Federation must be protected.

According to him, NNPC will now operate strictly as a commercial enterprise in line with the law, stressing that the era of duplicative deductions and fragmented oversight in the sector is over. Tinubu also disclosed that his administration would undertake a comprehensive review of the Petroleum Industry Act to address structural and fiscal anomalies weakening national revenue.

He further announced the approval of an implementation committee to oversee and ensure effective and coordinated execution of the executive order on the matter.

The President said, “Nigeria can no longer afford leakage where there should be leadership. We are safeguarding the Federation Account. We are strengthening our budget. We are acting in the national interest.”

He reiterated that the reforms are part of his administration’s commitment to Nigerians, adding that the policy direction aligns with his “Nigeria First” promise.

Based on the latest Federation Allocation Accounts Committee revenue data for 2025, the reallocation could have far-reaching implications for government earnings and sector institutions.

While many Nigerians and energy experts have expressed concerns over the potential impact of the policy on the oil and gas industry, a review of potential revenue reallocation suggests that the NNPC may be the least affected among the key players.

Other relevant government agencies operating within the sector could bear a heavier burden, particularly in terms of revenue losses, operational adjustments, and institutional restructuring.

Findings indicated that NNPC may lose about N906.91bn in management fees and Frontier Exploration Fund deductions. Each of the funds accounted for N453.455bn in 2025. A breakdown showed that the N453.455bn realised for frontier exploration fell short of the N710.520bn budgeted for the year, leaving a deficit of N257.066bn.

The monthly trend reveals the volatility of the fund. In January, N31.77bn was deducted from the frontier line, when PSC profits came in at N105.91bn. The February deduction rose to N38.30bn from a profit of N127.67bn, representing a 20.6 per cent increase on the January inflow.

March provided the first big surge, with N61.49bn allocated to frontier exploration from profits of N204.96bn, a jump of 60.5 per cent on February’s figure. April, however, saw deductions ease back to N36.58bn as profits slid to N121.93bn, a 40.5 per cent drop compared with March.

In May, the fund received N38.8bn, only slightly higher than April’s contribution, reflecting profit of N129.33bn. June delivered the lowest allocation so far this year, just N6.83bn, after profits collapsed to N22.77bn. That represented an 82.4 per cent fall from May.

The flow recovered somewhat in July, with N25.34bn transferred into the fund from profits of N84.48bn. In August, the trend rose sharply to its highest level so far this year, as Profit Sharing Contract earnings surged to N263.13bn. This translated to N78.94bn remitted to the Frontier Exploration Fund, more than three times the July contribution and about twelve times the amount recorded in June.

The momentum was sustained in subsequent months. In September, PSC profit stood at N275.38bn, with N82.61bn deducted for frontier exploration. October recorded a sharp decline, as profit dropped to N36.82bn, while deductions amounted to N11.05bn.

In November, profit rebounded to N112.32bn, with N33.70bn transferred to the fund. However, by December, PSC earnings moderated again to N26.82bn, resulting in frontier exploration deductions of N8.05bn.

The same 30 per cent rule also applied to NNPC’s management fees, which mirrored the frontier deductions exactly. In January, NNPC booked N31.77bn; in February, N38.30bn; in March, N61.49bn; in April, N36.58bn; in May, N38.8bn; in June, N6.83bn; in July, N25.34bn; in August, N78.94bn; N82.614bn in September; N11.046bn in October; N33.695bn in November and N8.046bn in December.

Under the Petroleum Profits Tax, Hydrocarbon Tax, and other levies administered by the NRS, a total of N4.905tn was collected in 2025. This revenue will now be channelled directly to the Federation Account. The earnings, however, exclude company income tax on upstream activities and other revenue streams.

Similarly, the MDGIF, which was established to finance strategic gas infrastructure projects and improve domestic gas utilisation, recorded total collections of N596.61bn in 2025. With the recent directive, these funds will now be subject to the same public finance rules governing statutory allocations, signalling a shift in oversight.

Monthly inflows into the MDGIF in 2025 were highly variable: N35.07bn in January, N31.82bn in February, N52.99bn in March, N29.19bn in April, N41.27bn in May, N66.18bn in June, N50.98bn in July, N57.04bn in August, N66.32bn in September, N66.32bn in October, N59.42bn in November, and N46.90bn in December. The highest single-month collection of N66.32bn in both September and October accounted for about 11.1 per cent of the annual total each, while the lowest in April (N29.19bn) represented just under 4.9 per cent of the year’s total.

Cumulatively, these revenue streams would amount to a total of N14.72tn, although the actual inflows could rise or fall depending on fluctuations in crude oil production and exploration activities, which directly determine the amount of revenue generated.

The anticipated upsurge in oil and gas revenue remittances is expected to deliver a significant boost to sub-national earnings, providing state and local governments with much-needed fiscal resources. This inflow could sharply reduce budget deficits, easing financial pressures across the federation and enabling more consistent funding for critical infrastructure and social services.

Over the years, concerns have been raised by the Nigeria Extractive Industries Transparency Initiative and the National Assembly of Nigeria over revenue leakages, delayed remittances, and opaque deductions in the oil and gas sector.

With the new directive, Nigeria may be entering a new phase of fiscal discipline and transparency in its most critical revenue-generating industry.

Experts react

Commenting, the Chair of the Oil, Gas, and Energy Policy Forum, Professor Wumi Iledare, urged careful consideration of the recent Executive Order by President Bola Tinubu directing the direct remittance of oil and gas revenues to the Federation Account.

The order, described by Iledare as a “significant fiscal intervention,” aims to strengthen revenue transparency, curb discretionary retention, and ensure statutory remittances flow efficiently to the three tiers of government.

In a statement obtained by The PUNCH on Thursday, titled “PEWI Responds to Presidential Executive Order on Direct Remittance of Oil and Gas Revenues”, Iledare acknowledged the government’s stated objectives.

“Safeguarding public revenues, curbing inefficiencies, and enhancing fiscal discipline are legitimate public finance priorities, particularly in a period of budgetary strain and debt sustainability concerns,” he said.

However, Iledare warned that parts of the Executive Order may intersect with statutory provisions under the PIA 2021, including the Frontier Exploration Fund, the Midstream and Downstream Gas Infrastructure Fund, and existing Production Sharing Contract fiscal arrangements.