Tinubu’s NNPC ‘cash grab’ raises concerns amid oil reform gains

Diverting key revenue streams from the Nigerian National Petroleum Company (NNPC), a sweeping executive order by President Bola Tinubu has rattled Nigeria‘s industry, igniting concerns over investment stability, operational autonomy and the future of the energy giant.

Tinubu, in a surprise move on Wednesday, mandated the NNPC to remit all oil and gas revenues to the Federation Account, scrapping key retention mechanisms that underpinned the company’s finances following the enactment of the Petroleum Industry Act (PIA).

The order, signed on 13 February, has sparked concerns over the effectiveness of the PIA, the future of NNPC as a commercial entity and the country’s credibility with investors.

The president’s directive bars the NNPC from keeping the 30% management fee it deducted from profit for oil and gas under production sharing, profit sharing and risk service contracts. The order also cancelled the state-owned company’s access to the 30% frontier exploration fund.

For Abuja and cash‑strapped state governments, the implications are immediate: more money, faster.

“The executive order’s chief advantage is clearer public finances and reduced loss of federal revenue,” Ayodele Oni, partner at Lagos-based law firm Bloomfield LP, tells The Africa Report. “Requiring oil and gas receipts to be paid directly into the Federation Account increases transparency, curtails discretionary deductions and wasteful expenditures … and strengthens the federation’s cash position.”

However, he warns that altering key fiscal arrangements created by the PIA “risks undermining carefully negotiated legislative reforms and revives concerns that the sector’s regulatory architecture can be shifted by administrative action rather than fixed by statute”.

Under the order, all contractors and operators in production-sharing contracts must now pay royalty oil, tax oil, profit oil, profit gas and any other interest due to the federal government directly into the Federation Account, rather than via NNPC accounts. Tinubu also directed that gas flaring penalties be paid into the Federal Account, not the Midstream and Downstream Gas Infrastructure Fund (MDGIF).

Over the past year, the industry has shown signs of a turnaround after more than a decade of investment drought following a series of executive orders.

International oil companies that had slashed spending are sanctioning big-ticket projects, indigenous operators are snapping up billion-dollar assets, production is stabilising and the country’s biggest oil block auction since the new law kicked in is underway.

Who can rewrite the PIA?

The core controversy lies not in the policy’s goals, but in its method.

“While executive authority under Section 5 of the constitution empowers the president to implement and enforce laws, substantive alterations to statutory fiscal frameworks may require legislative amendment to ensure constitutional alignment and institutional certainty,” says Wumi Iledare, professor of petroleum economics and chair of Abuja-based PEWI Oil, Gas and Energy Policy Forum.

SBM Intelligence says the order’s assertion that previous deductions were unconstitutional may face scrutiny. “As the deductions were authorised under the PIA … the legal standing of an executive order to supersede them could be challenged. The National Assembly may also wish to examine the implications of this executive action on its legislative authority,” it says in an analyst note.

For Horizon Engage’s director for sub-Saharan Africa, Clement Wallop, the direction was expected, but not the method. “We had been expecting some of these moves: management fee change, frontier exploration fund suspension and the MDGIF shift had been mooted since the third quarter of 2025. However, I had expected them via PIA amendments, not an executive order.”

Festus Osifo, president of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), described the move as an “aberration” and a direct attack on the rule of law.

“Executive order[s] cannot override the provision of a law,” Osifo said on 19 February in Lagos. “What the president has done is that he has used an executive order to set aside a law of the Federal Republic of Nigeria … This is an aberration. This should never have happened.”

Iledare cautions that even well-intentioned reforms must be anchored in process: “Reforms that improve transparency and fiscal integrity are welcome. However, sustainable reform must align with constitutional processes, statutory frameworks and investor predictability.”

Who funds the NNPC tomorrow?

The executive order is expected to reshape NNPC’s business model.

“Stripped of its management fee and the frontier fund exploration share, the NNPC can no longer subsidise itself through automatic deductions from national oil receipts and will have to function as a commercially driven firm,” says Oni. “That means running like any other profit-seeking oil and gas company.”

Asked whether the NNPC can still finance its operations and expansion plans without returning to the government for bailouts, Oni says: “In the short-to-medium term, this will be extremely challenging … If retained earnings shrink significantly, the NNPC may have to rely on sovereign guarantees, budgetary support or joint-venture partner funding, effectively reintroducing state dependence that the PIA sought to eliminate.”

PENGASSAN’s concern is more immediate: jobs. “We are worried because our members in the NNPC today are close to 4,000,” Osifo said. “If this is allowed to sail through, I can tell you that within the next few months, our members are in danger of being declared redundant, because the company may not be able to meet their obligations to our members.

Frontier basins, investor nerves and the 2027 election

Beyond the NNPC’s internal finances, the suspension of the 30% frontier exploration fund looks set to put the brakes on the search for oil in under‑explored inland basins.

“The removal of the 30% frontier exploration allocation materially weakens the financial foundation for exploration in high-risk, under-explored basins such as the Chad, Sokoto, Benue and Anambra basins,” Oni says.

Investor confidence may be another casualty. Oni warns that “altering fiscal provisions of the PIA through an executive order rather than a formal legislative amendment could create legal and investor-confidence risks”, including court challenges and “regulatory overreach” fears.

“From an investor-confidence perspective, the order weakens the sanctity of the PIA bargain and may increase Nigeria’s perceived political and regulatory risk premium, particularly for long-term upstream and gas projects,” he says.

SBM Intelligence and Wallop both see this as a political gamble for the 2027 election. “The political logic is undeniable. President Tinubu has calculated, with some justification, that the benefits of centralising revenue control outweigh the risks of legal challenge,” the SBM Intelligence note read.

(The Africa Report)