President Bola Tinubu has moved to overhaul Nigeria’s oil revenue architecture with a sweeping executive order directing the Nigerian National Petroleum Company Limited (NNPC Ltd) to cease automatic deductions of management fees and Frontier Exploration Fund contributions before remitting proceeds to the Federation Account.
The directive, which aligns oil revenue flows strictly with constitutional fiscal provisions, effectively suspends deduction streams that generated approximately N2.076 trillion between 2022 and 2025.
N2.1tn in Four Years: A Breakdown of Retained Earnings
A review of Federation Account Allocation Committee (FAAC) submissions shows that NNPC retained:
- N20.739bn in 2022
- N695.9bn in 2023
- N452.6bn in 2024
- N906.91bn in 2025
This aggregates to roughly N2.1tn over four fiscal years, representing earnings deducted before remittance to the federation. The President’s directive mandates that all oil and gas revenues must now be paid in full into the Federation Account before any operational charges are considered. This reordering prioritizes constitutional revenue-sharing obligations over funding mechanisms embedded in the Petroleum Industry Act (PIA).
Constitutional Supremacy Over Operational Funding
The executive order explicitly halts deductions such as:
- Management fees
- Frontier Exploration Fund contributions
- Certain service-related retention charges
Under the new arrangement, NNPC must remit gross revenues and subsequently seek approval for operational expenditures through the national budgetary process. The administration argues that this approach strengthens fiscal transparency and ensures compliance with constitutional revenue distribution principles.
Divergent Reactions Across Stakeholders
The order has triggered sharp debate within fiscal and energy policy circles. State governments and public finance advocates have praised the move, noting that it increases distributable revenue to the three tiers of government. Analysts argue that if the deductions had been suspended earlier, the federation would have captured the entire N2.1tn, potentially strengthening reserves, debt servicing capacity, and infrastructure financing.
However, industry operators and legal commentators caution that the decision may create friction between the constitutional framework and statutory provisions of the Petroleum Industry Act. They contend that the Frontier Exploration Fund was designed to support reserve growth, especially in underexplored basins, while structured management fees helped maintain operational efficiency.
Labour unions, including the Petroleum and Natural Gas Senior Staff Association of Nigeria, have called for clarity on implementation. They insist reforms must not destabilize production levels or jeopardize employment within the sector. A presidential implementation committee has been tasked with coordinating compliance and supervising the transition.
Volatility in Retained Earnings: 2022–2025 Trend Analysis
2022: Modest Retention, Recorded Deficit
In 2022, NNPC retained N20.739bn from management fees, frontier exploration allocations, and related service deductions. During that period, N14.323bn came specifically from frontier exploration services. However, financial reports also reflected deficits, including N36.15bn shortfalls and N3.21bn allocations each to management and frontier funds.
2023: Explosive Expansion in Deductions
Retention surged dramatically in 2023 to N695.9bn, representing a N675.161bn year-on-year increase — a 3,255.4 percent growth compared to 2022.
Month-by-month movements revealed significant swings:
- January: N29.30bn
- February: N25.66bn (12.42% decline)
- March: N44.78bn (74.49% increase)
- April: N32.74bn (26.88% drop)
- May: N38.99bn (19.09% rise)
- June: N63.72bn (63.43% surge)
- July: N47.38bn (25.64% decline)
- August: N38.11bn (19.57% drop)
- September: N48.44bn (27.11% increase)
- October: N46.17bn (4.69% decline)
- November: N110.996bn (140.41% spike)
- December: N169.63bn (52.82% rise)
December 2023 recorded the highest monthly figure of the year. Although the retention formula maintained a structural split of roughly 60 percent of profit, actual monetary values fluctuated widely, mirroring volatility in oil earnings.
2024: Sharp Contractions and Sudden Spikes
In 2024, retained earnings moderated to N452.6bn. However, monthly volatility intensified:
- January: N14.67bn
- February: N46.022bn (213.7% increase)
- March: N12.342bn (73.2% decline)
- April: N24.028bn (94.7% rebound)
- May: N12.524bn (47.9% fall)
- June: N11.64bn (7.1% decline)
- July: N12.342bn (6% rise)
- August: N5.36bn (56.6% drop)
- September: N70.346bn (1,211.7% surge)
- October: N61.108bn (13.1% decline)
- November: N95.808bn (56.8% increase)
- December: N44.504bn (53.6% drop)
Month-on-month changes ranged from a 73.2 percent contraction to an extraordinary 1,211.7 percent expansion, underscoring instability in profit flows and deductions.
2025: Renewed Surge to N906.91bn
In 2025, retained deductions climbed to N906.91bn — more than double the 2024 figure and 4,271.6 percent higher than 2022 levels. Both management fees and frontier exploration contributions accounted for N453.455bn each. However, frontier exploration receipts fell short of the N710.520bn budgeted allocation, leaving a deficit of N257.066bn.
Frontier Exploration Fund: Monthly Pattern in 2025
The Frontier Exploration Fund operated on a 30 percent profit allocation model, mirrored by management fees.
Monthly allocations were as follows:
- January: N31.77bn (from N105.91bn profit)
- February: N38.30bn (20.6% increase)
- March: N61.49bn (60.5% surge)
- April: N36.58bn (40.5% decline)
- May: N38.8bn
- June: N6.83bn (82.4% collapse)
- July: N25.34bn
- August: N78.94bn (threefold increase over July)
- September: N82.61bn
- October: N11.05bn
- November: N33.70bn
- December: N8.05bn
The same pattern applied to management fees, reflecting identical 30 percent deductions. Energy economists note that such volatility complicates fiscal forecasting and revenue planning at federal and subnational levels.
Policy Implications for Nigeria’s Oil and Gas Sector
The Tinubu administration’s position is that the new directive restores fiscal discipline by ensuring that gross oil revenues first enter the Federation Account before any operational allocation. The executive order states that non-compliance would constitute a breach of constitutional fiscal provisions.
Supporters argue that channeling full revenues into the federation strengthens transparency, improves debt metrics, and enhances distributable allocations to states. Conversely, critics warn that removing automatic funding streams for frontier basins could slow reserve expansion and deter investment unless alternative financing mechanisms are institutionalized quickly.
The long-term success of the reform will depend on:
- Clear budgetary funding frameworks for NNPC operations
- Transparent remittance tracking
- Sustained oil production levels
- Legal harmonization between constitutional mandates and the Petroleum Industry Act
As implementation begins, attention will focus on whether the new remittance regime stabilizes public finances without undermining Nigeria’s upstream growth ambitions.
