Uncertainty and Concerns Over New Executive Order in Nigeria’s Oil and Gas Sector
Fresh questions, concerns, and uncertainty have deepened at the oil and gas agencies affected in the wake of President Bola Tinubu’s new executive order directing immediate reallocation of oil and gas revenues to the Federation Account for onward distribution among the three tiers of government. The directive has sparked deep concerns within the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the Nigerian National Petroleum Company Limited (NNPC), and the board and management of the Midstream and Downstream Gas Infrastructure Fund.
The uncertainty, according to industry operators and experts, centres on the absence of a clearly defined alternative funding model for the NUPRC to meet its statutory obligations following the reallocation of oil and gas royalties to the Federation Account. They also rejected a possible solution of conventional budgetary funding and approval through the National Assembly, insisting that such a move would undermine NUPRC’s operational independence and efficiency.
They noted that relying on annual budget approvals and capital releases from the Ministry of Finance could expose the regulator to bureaucratic delays, political pressures, and funding uncertainties that may weaken its ability to carry out core oversight, monitoring, and enforcement functions in the upstream sector.
The sources also noted that questions persist over how the government intends to sustain and improve the country’s Reserve Replacement Ratio, particularly as the financing framework for frontier exploration activities remains unclear. They added that the recent directive has created fresh ambiguity around the roles and operational scope of the Frontier Exploration Services and the Midstream and Downstream Gas Infrastructure Fund, amidst the country’s aim to increase crude production to about three million barrels per day by 2030 and attract fresh investments estimated at over $12bn annually.
At the NUPRC, two senior officials, who spoke on condition of anonymity because they were not authorised to comment publicly, argued that the statutory funding framework provided under the Petroleum Industry Act was deliberately designed to shield the commission from such constraints and ensure timely decision-making in a highly technical and sensitive industry.
Section 12 of the PIA 2021 empowers the commission to appoint staff and determine their terms and conditions of service, including remuneration, allowances, and benefits. The Act mandates that these packages be designed to ensure the commission can recruit and retain highly skilled professional personnel, “and remuneration and allowances paid in the private sector in upstream petroleum operations to individuals with equivalent responsibilities, expertise, and skills.”
They lamented that the order may negatively impact the ability of the commission to perform these functions of matching salary payments to be competitive with international oil companies.
Impact on NNPC and Other Agencies
It was further gathered that there are also concerns about how the directive could affect the long-term reform trajectory of the NNPC, especially as conversations around its potential listing on the stock exchange continue. Questions have also arisen over the mechanics of the revenue reallocation, particularly regarding royalties, fees, and production-based payments, which often vary depending on crude type, production levels, and contractual terms.
Two NNPC senior officials warned that the new directive could significantly disrupt ongoing production sharing contract operations, affect staff deployment, and send negative signals to investors, particularly in the deepwater segment of Nigeria’s oil and gas industry.
One of the officials, who spoke on condition of anonymity because he was not authorised to speak publicly, said the order could weaken the company’s operational oversight over production sharing contracts and affect hundreds of personnel dedicated to such activities.
According to him, no fewer than 400 to 500 staff are dedicated on a daily basis to overseeing and managing PSC operations, including monitoring production, reviewing costs, and ensuring compliance across various deepwater assets.
He said, “It would affect us to a great extent because we have staff who are dedicated to these lines of activity. We have no fewer than 400 to 500 staff whose daily work is focused on production sharing contracts. These are professionals working on rigs, platforms, seismic operations, and cost monitoring. We are talking about personnel across 39 PSC sites, out of which 14 are producing, and about five major sites contribute nearly 80 per cent of output under these arrangements.”
According to him, the directive could disrupt the monitoring framework that ensures cost efficiency and transparency in deepwater operations.
“It would impact us negatively. That is the truth. It is an extremely bad situation and not well thought out. I personally believe that the President was wrongly advised. The Petroleum Industry Act was crafted with deepwater assets development in mind. The idea was to create enabling laws that would attract investors. But this order is already sending a wrong signal to prospective investors. It shows that with just an executive order, a law can be changed overnight without a single debate.”
Reactions from Industry Stakeholders
Despite the concerns, sources confirmed that implementation has already begun, with revenues reportedly being channelled into designated Federation Account structures, including accounts monitored in collaboration with international financial institutions.
The Federal Government has warned that any breach of the directive would be considered a violation of a lawful Executive Order as well as constitutional fiscal provisions, underscoring the legal weight and binding nature of the policy.
Experts call for caution, warning that the funding structure of both the NNPC and NUPRC must be handled carefully to avoid disruption. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, highlighted the importance of maintaining credible, stable, and flexible funding mechanisms for these institutions.
Professor of Energy Law at the University of Lagos, Ayo Ayoade, cautioned the Federal Government against enforcing direct remittance policies in the petroleum sector through executive orders, warning that such moves could conflict with existing legislation, particularly the Petroleum Industry Act.
Conclusion
As the implementation begins, attention is now shifting to the National Assembly, where the NUPRC and possibly other agencies are expected to make their case, in what could become a defining test of the balance between executive authority and statutory independence in Nigeria’s oil and gas sector. The debate continues as stakeholders weigh the implications of the new directive on regulatory effectiveness, investor confidence, and the overall stability of the nation’s energy landscape.
