KEY POINTS:
- Analysts say the new executive order mandating direct oil revenue remittance may weaken NNPCL’s cash flow and operational flexibility.
- Experts warn of possible delays in vendor payments, investment risks, and potential workforce cuts.
- Government insists the policy will boost transparency, curb leakages, and strengthen public finances.
MAIN STORY
Analysts have raised concerns over the potential liquidity challenges facing the Nigerian National Petroleum Company Limited (NNPCL) following a new executive order by President Bola Tinubu mandating the direct remittance of oil and gas revenues into the Federation Account.
Experts say the directive, signed on Feb. 18, could significantly reduce the national oil company’s ability to retain funds previously used to meet operational and financial obligations, including payments to vendors and investors.
The order suspends certain revenue retention mechanisms provided under the Petroleum Industry Act (PIA) 2021, raising fears of operational disruptions and regulatory uncertainty within the oil and gas sector.
THE ISSUES
Key provisions affected by the executive order include:
- The 30 per cent Frontier Exploration Fund allocation.
- The 30 per cent NNPCL management fee on profit oil and gas.
- The redirection of gas flare penalties to the Federation Account.
Analysts warn that overriding Sections 8, 9, and 64 of the PIA could increase investment risks and create policy uncertainty for both local and foreign investors.
WHAT’S BEING SAID
Dr Muda Yusuf, founder of the Centre for the Promotion of Private Enterprise and former Director-General of the Lagos Chamber of Commerce and Industry, cautioned that removing key revenue streams may affect the company’s ability to meet financial obligations.
He warned against placing NNPCL under bureaucratic “envelope budgeting,” saying it could lead to operational delays.
Similarly, Dr Joseph Obele, National Public Relations Officer of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), said the directive could weaken operational flexibility and discourage long-term capital investment.
He also noted that cost-cutting measures, including workforce reductions, could follow.
Labour unions have strongly opposed the policy. The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, warned that the directive threatens staff welfare and institutional stability.
Likewise, the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) has called for urgent stakeholder consultations to clarify the order’s implications.
WHAT’S NEXT
The Federal Government maintains that the order is designed to realign oil revenue flows with constitutional provisions, reduce leakages, and strengthen fiscal transparency amid declining inflows to the Federation Account.
Stakeholder engagement and policy adjustments are expected as labour unions push for dialogue and analysts urge careful transition management to avoid operational shocks.
BOTTOM LINE
While the executive order promises improved transparency, stronger public finances, and reduced revenue leakages, analysts warn that without careful implementation, it could strain NNPCL’s liquidity, disrupt operations, and heighten investment uncertainty in Nigeria’s oil and gas sector.
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