President Bola Tinubu has signed an Executive Order, EO, to
safeguard and enhance oil and gas revenues for the Federation, curb wasteful
spending, eliminate duplicative structures in this critical sector of the
national economy, and redirect resources for the benefit of the Nigerian
people.
His Special Adviser on Information and Strategy, Bayo
Onanuga disclosed this in a statement on Wednesday, stressing that Tinubu
signed the EO in pursuance of Section 5 of the Constitution of the Federal
Republic of Nigeria (as amended).
The Executive Order 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.
According to the statement, the directive seeks to restore
the constitutional revenue entitlements of the Federal, State, and Local
Governments, which were taken away in 2021 by the Petroleum Industry Act, PIA.
The PIA created structural and legal channels through which
substantial Federation revenues are lost through deductions, sundry charges,
and fees.
Under the current PIA framework, NNPC Limited retains 30 per
cent of the Federation’s oil revenues as a management fee on Profit Oil and
Profit Gas derived from Production Sharing Contracts, Profit Sharing Contracts,
and Risk Service Contracts.
The statement noted that given the existing 20% retention,
the additional 30% management fee is considered unjustified by the Federal
Government, as the retained earnings are already sufficient to support the
functions NNPCL performs under these contracts.
“NNPC Limited also retains another 30% of its oil and profit
gas under the production sharing, profit sharing, and risk service contracts,
as the Frontier Exploration Fund under sections 9(4) and (5) of the PIA. A fund
of this size, being devoted to speculative exploration, risks accumulating
large idle cash balances, which would encourage inefficient exploration
spending, at a time when government resources are urgently needed for core
national priorities, including security, education, healthcare, and energy
transition investments.
“There is also the Midstream and Downstream Gas
Infrastructure Fund (MDGIF) under Section 52(7)(d) PIA, funded by the
collection of gas flaring penalties provided under Section 104. The fund is to
be used for supporting environmental remediation and relief for host
communities impacted by gas flaring.
“However, section 103 of the PIA has already established a
dedicated Environmental Remediation Fund, administered by NUPRC, specifically
designed to fund the rehabilitation of communities negatively impacted by
upstream petroleum operations, including gas flaring. Furthermore, Section 103
already imposes a fee on lessees to contribute to this fund for precisely this
purpose,” the statement read in part.
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