FG Suspends Gas-Flare Fund Payments, Restructures NNPC Revenue Role

President Bola Tinubu has signed an Executive Order mandating the direct remittance of oil and gas revenues into the Federation Account, in a sweeping reform aimed at blocking leakages, eliminating structural deductions, and strengthening fiscal transparency in Nigeria’s petroleum sector.

The development was disclosed in a State House statement issued by the Special Adviser to the President on Information and Strategy, Bayo Onanuga. According to the presidency, the directive was issued pursuant to the President’s constitutional powers and anchored on provisions that vest ownership and control of mineral resources in the Government of the Federation.

The order is designed to safeguard national oil income, curb wasteful spending, eliminate duplicative institutional arrangements, and channel more resources toward national priorities such as security, healthcare, education, infrastructure, and energy transition investments.

Review of Petroleum Industry Act Provisions
Central to the reform is a review of fiscal structures introduced under the Petroleum Industry Act (PIA) of 2021, which government officials say significantly reduced net oil revenues available to the three tiers of government.

Under the existing framework, NNPC Limited retained:

30 per cent of Federation oil revenues as management fees from production-sharing and related contracts

20 per cent of company profits for working capital and future investments

30 per cent of profit oil and gas allocated to the Frontier Exploration Fund

Officials argue that these deductions collectively diverted more than two-thirds of potential oil earnings, thereby weakening fiscal capacity and contributing to declining public revenues.

The presidency described the additional 30 per cent management fee as unjustifiable, noting that the approved 20 per cent profit retention already covers operational requirements. It also expressed concern that substantial allocations to frontier exploration could result in idle fund accumulation amid pressing national expenditure demands.

Gas-Flare Penalties Now to Federation Account

The Executive Order also restructures environmental and gas infrastructure financing mechanisms within the sector.

Previously, proceeds from gas-flaring penalties were paid into a dedicated midstream and downstream gas infrastructure fund, despite the existence of a separate environmental remediation mechanism for host communities.

Under the new directive:

Gas-flare penalty proceeds will be paid directly into the Federation Account

Payments into the gas infrastructure fund are suspended

All related expenditures must strictly comply with public procurement regulations

Government officials say the measures will enhance fiscal discipline, accountability, and transparency in the management of environmental remediation resources.

Direct Payments Effective February 13, 2026
Effective February 13, 2026, all oil and gas operators under production-sharing contracts are required to remit royalty oil, tax oil, profit oil, profit gas, and all government-due proceeds directly into the Federation Account.
Additionally:

NNPC Limited will no longer manage the 30 per cent Frontier Exploration Fund
The company will cease collecting the 30 per cent management fee on profit oil and gas
The presidency said these changes are expected to restore full constitutional revenue entitlements to federal, state, and local governments while improving fiscal sustainability.

Repositioning NNPC as a Commercial Entity
Beyond revenue recovery, the directive seeks to address structural concerns regarding NNPC Limited’s dual role as both concessionaire and commercial operator.

According to the presidency, allowing the company to influence operational costs while competing in the market creates distortions inconsistent with its transition into a fully commercial enterprise.

The order therefore aims to reposition NNPC strictly as a commercial energy company, remove overlapping fiscal privileges, and strengthen governance and regulatory clarity within the oil and gas industry.

Implementation Committee Established
President Tinubu also approved the formation of a high-level implementation committee comprising key ministers, fiscal authorities, justice officials, and senior economic advisers. The Budget Office of the Federation will serve as secretariat.

The committee is tasked with coordinating enforcement, monitoring fiscal outcomes, and aligning regulatory frameworks across the petroleum value chain.
Economic Impact

The President described the reforms as urgent national-interest measures, warning that continued revenue leakages threaten budget stability, debt sustainability, macroeconomic balance, and social-sector investment.

By restoring direct remittance flows, the administration expects stronger federation revenues, reduced borrowing pressures, and improved funding for infrastructure and human capital development.

The presidency further indicated that a comprehensive review of the Petroleum Industry Act is forthcoming, signaling that additional structural reforms may follow as part of broader energy-sector restructuring efforts.