Economic and energy analysts have raised concerns that a recent executive order signed by Bola Tinubu mandating the direct remittance of oil and gas revenues into the Federation Account could significantly affect the liquidity and operational flexibility of the Nigerian National Petroleum Company Limited (NNPCL).
The directive, signed on February 18, suspends certain revenue retention mechanisms previously available to NNPCL under the Petroleum Industry Act (PIA) 2021 and mandates that oil and gas proceeds be paid directly into the Federation Account.
In an exclusive interview, Dr. Muda Yusuf, founder of the Centre for the Promotion of Private Enterprise (CPPE) and former Director-General of the Lagos Chamber of Commerce and Industry (LCCI), cautioned that the new order could have serious cash-flow implications for the national oil company.
“These are major sources of revenue for NNPC. There are ongoing obligations to vendors, to investors. Now that these revenue streams have been taken away, it may also have implications for the capacity or ability of NNPC to continue to function the way it has been functioning,” Yusuf said.
He warned against placing NNPCL under the federal government’s envelope budgeting system, describing it as bureaucratic and prone to delays that could hamper operational efficiency.
“We don’t want to subject NNPC to this envelope system, which has been characterised by all manner of delays and bureaucracy,” he added.
Similarly, Dr. Joseph Obele, an energy expert and National Public Relations Officer of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), speaking in his personal capacity, warned that the move could weaken operational flexibility and discourage long-term capital investments in the sector.
Analysts argue that overriding Sections 8, 9, and 64 of the PIA may introduce regulatory uncertainty and elevate investment risk perceptions, particularly among foreign investors assessing Nigeria’s long-term fiscal stability.
Yusuf stressed the importance of carefully managing the transition to avoid operational disruptions.
“Managing that transition to minimise the shock of this revenue transfer on NNPC operations is very important, because NNPC remains a very strategic institution for the country,” he said, noting that several agencies have previously sought exemption from the envelope budgeting framework due to funding delays.
Despite concerns, some stakeholders acknowledge potential benefits of the policy. Centralising oil and gas revenues into the Federation Account could increase allocations to federal, state, and local governments, thereby strengthening public finances.
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Direct remittance may also improve transparency and accountability by reducing off-budget deductions and enhancing public oversight of petroleum revenues. By eliminating certain retained fees and ring-fenced funds, the policy could block financial leakages and ensure full remittance of national resources.
Additionally, the executive order could compel NNPCL to operate strictly as a commercial entity, prioritising profitability and cost efficiency rather than relying on retained government funds.
The federal government has stated that the directive is intended to realign oil and gas revenue flows with constitutional provisions, curb leakages, and strengthen fiscal transparency amid declining inflows into the Federation Account despite improved production and favourable market conditions.
According to the government, the order mandates the direct remittance of taxes, royalties, and profit oil under Production Sharing Contracts to the appropriate fiscal authorities in order to safeguard revenues due to the Federation.
However, organised labour in the oil and gas sector has rejected the policy. The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, argued that the directive threatens staff welfare, operational autonomy, and the financial stability of key institutions. He called for urgent consultations with the government to reconsider its implementation.
Similarly, the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) urged President Tinubu to convene a broad-based stakeholders’ meeting to clarify the details and implications of the executive order on the nation’s oil and gas industry.
As debate intensifies, stakeholders across the sector are closely watching how the new policy will reshape revenue management, corporate governance, and investor confidence in Nigeria’s critical oil and gas sector.