PRESIDENT Bola Ahmed Tinubu, last week, sent shockwaves down the spine of many Nigerians in the oil sector when he signed an Executive Order for the direct remittance of oil and gas revenues to the Federation Account. The Order, the President said, would safeguard and enhance oil and gas revenues for the federation, curb wasteful spending, and eliminate duplicative structures in the oil and gas sector.
In effect, the NNPC Limited will no longer collect and manage the 30 per cent frontier exploration fund, according to the Executive Order, which is now an official gazette. With that, the NNPC is to ensure that the 30 percent profit from oil and gas production sharing, profit sharing, and risk service contracts currently earmarked for the Frontier Exploration Fund (FEF) is henceforth transferred to the Federation Account.
Again, the NNPC Limited will no longer be entitled to the 30 per cent management fee on profit oil and profit gas revenues, which would also now go directly to the Federation Account. In the same vein, all operators/contractors of oil and gas assets held under a production sharing contract shall pay Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and any other interest howsoever described and which is due to the government of the federation directly to the Federation Account.
The Order also suspended payments of gas flare penalty into the Midstream and Downstream Gas Infrastructure Fund (MDGIF) as such penalties imposed on operators for flaring gas must go to the federation account. All expenditure from the MDGIF shall also be conducted in line with extant public procurement laws, policies, and regulations.
The Executive Order, we have been told, 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.
However, even before the ink on the order dried up, opposition from expected and unexpected quarters are already up-in-arms against it. Leading the pack is the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN). Its President, Festus Osifo, while reacting to the Executive Order, described it as a slap on the Petroleum Industry Act (PIA), and urged the president to recall it.
Osifo told a world press conference 24 hours after the Executive Order was signed by President Tinubu that it was a direct attack on the PIA. The relevant portions in the PIA that the Executive order abridged, he stated, were sections 8, 9, and 64. According to him, President Tinubu has used an Executive Order to ‘’set aside a Law of the Federal Republic of Nigeria’’
‘’We think that with immediate effect, the President should recall the Executive Order and have a second look at it, because we know that the President of the Federal Republic of Nigeria has done everything possible to attract investment to the oil and gas industry. But we strongly believe that in this particular case, the President has been misled. The people advising the president did not actually tell him the entire truth.’’
Then the subtle blackmail: ‘’Our members are in danger of being declared redundant because NNPC may not be able to meet their obligations to our members and it will also weaken investor confidence in Nigeria’s oil and gas sector as it could create uncertainty about the stability of its legal and fiscal framework’’ Osifo stated.
While some of the concerns raised by Osifo may be justified, he has directly and indirectly questioned the power and authority of the President. What he may not be aware of is the fact that the President has identified structural concerns regarding the continued role of NNPC Limited as a concessionaire under Production Sharing Contract arrangements.
Indeed, 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 whilst safeguarding the Federation’s interests.
The Nigerian National Petroleum Company (NNPC) Limited, on July 1, 2022, became a Limited Liability Company whose operations would be fully run in compliance with the provisions of the Companies and Allied Matters Act (CAMA) of 2020. This is in accordance with the provisions of the Petroleum Industry Act (PIA). Indeed, with the passage of the PIA, there’s no gainsaying that the operations of the NNPC Limited would be significantly impacted when the law comes into full swing.
Section 53(1) of PIA 2021 requires the Minister of Petroleum Resources to course for the incorporation of the NNPC Limited within six months of the enactment of the PIA in consultation with the Minister of Finance on the nominal shares of the company. The PIA also raised stakeholders’ expectations on the company, even as it has given it a wide room to stimulate investments in the oil and gas industry.
Also, Section 65 of the Act encourages the NNPC Limited and its joint venture partners to explore the use of incorporated joint venture companies. The NNPC Limited is also required to declare dividends to its shareholders and retain 20 per cent of profit as retained earnings to grow its business like any other incorporated entity under the Companies and Allied Matters Act, as provided under Section 53(7) of the PIA.
However, five years after it became a limited liability company, the change in name has not led to any significant improvement in the performance of the NNPCL. It has been held down by corruption by big men in the society who are not yet willing to give up the honey pot that the company has become to them. Under the new name and status, the NNPC Limited is expected to run like state-owned entities like Saudi Aramco, owned partly by the Kingdom of Saudi Arabia and American oil investors, and PETRONAS Global, owned by Malaysia. According to the law, the company will run on a commercial basis in a profitable and efficient manner without recourse to government funds.
Apart from profit-seeking, the NNPC Limited is expected to operate above board by mandatorily making disclosures for every financial year. While profit might seem evasive, disclosures are important for shareholders to know the state of affairs or any nagging concern. However, until 2020, the NNPC, then a corporation, had not published its audited financial accounts for 43 years. Nigerians would still love to see how their commonwealth was being managed.
NNPC Limited currently owns four refineries, two of which are located in Port Harcourt, one in Warri, and one in Kaduna. The refineries have a combined installed capacity of 445,000 b/d, but they are moribund and do not refine a single litre of fuel, leaving the nation entirely dependent on importation and an expensive subsidy regime. That came to an end when the Dangote Petroleum Industry came on board last year, and has saved the nation a huge amount in foreign exchange. Despite a good number of obstacles that were deliberately put in its way to sabotage its operations and making its Chairman, Alhaji Aliko Dangote to fight back, the refinery is up and running and changing the narrative of fuel queues in Nigeria.
However, our comatose national refineries give a stark contrast to Saudi Aramco, which it sought to emulate. Aramco currently owns five refineries. Its last one, Jazan Refinery Complex, was completed in 2021. Aramco currently refines about 3m b/d from its refineries. Oil from its refineries is used domestically and also exported to different parts of the world.
While the pandemic in 2020 affected businesses, especially the oil industry, and economies all over the world, Aramco reported a revenue of about $205 billion that same year. The following year in 2021, the corporation reported revenue of $360 billion. This makes Saudi Aramco one of the world’s most profitable companies, with a net income of over $100 billion in 2021. The NNPC since its creation has incurred losses after each financial year. In 2020, the NNPC reported revenue of N3.7 trillion (less than $10 billion), and a profit of N281 billion. In 2021, it made revenue of N2.9 trillion (less than $8 billion), and is notorious over the years for being embroiled in corruption scandals, debt repayment, and other issues in addition to its production and refining capacity, which account for the significant discrepancy in its revenues.
Mr. Bayo Ojulari, the new man in charge of the NNPC Limited, last year, promised that the company would be listed on the Nigeria Stock Exchange by 2028. Under the PIA, this should have been done as far back as 2022. As part of the preparation for the listing and to prepare a balance sheet for the future IPO, the Federal Government reportedly approved the write-off of approximately $5 billion in debts owed by the NNPCL in late 2025.
While Tinubu’s bold move with his new Executive Order should be commended, it would not be out of place if the revenue that would now be available to states and local governments translate to improved living conditions for the people of Nigeria. Nigeria’s wealth through God’s given crude oil and natural gas reserves have not really benefitted the masses – an irony that is embarrassing to our national existence and shameful to our reputation on the global scene. But the bureaucrats and those in government, who are the major beneficiaries of those resources have turned a blind eye to the anomaly.
Additionally, while executive authority under Section 5 of the Constitution empowers the President to implement and enforce laws, substantive alterations to statutory fiscal frameworks like the PIA may require legislative amendment to ensure constitutional alignment and institutional certainty. This should not be difficult for the President, as the National Assembly is there to lend muscle to the bidding. Such relevant portion of the PIA that conflicts with the new Executive Order should be amended without delay.
More opposition is still expected to the President’s Executive Order in the coming days, but the good news is that Tinubu is one tough politician who will stick to his guns once he believes that he is on the right course. Nigerians should see this Executive Order as more than a policy update, but as a clear signal that Nigeria’s natural resources will now be managed with greater transparency, efficiency, and accountability to the people. Nigeria’s petroleum sector remains central to national economic stability.
Reforms that improve transparency and fiscal integrity should be welcome with both arms. However, sustainable reform must align with constitutional processes, statutory frameworks, and investor predictability. The reform in the NNPC Limited is long overdue. Let’s wait and watch if Tinubu’s executive order would do the magic in finally transforming our lives for the better.
See you next week.
- Akintunde is the Publisher and Editor-in-Chief of Glittersonline newspaper. His syndicated column, Monday Discourse, appears on News Point Nigeria newspaper on Monday.