NNPC: Analyst Reacts to Tinubu's Executive Order, Mentions Possible Risks
- President Tinubu's new executive order regarding the remittance of oil and gas revenues has continued to generate reactions
- Richard Akinfele, an oil industry analyst, examined the possible risks that the move may bring, just as he also considered the arguments of those backing the order
- The Lagos-based analyst also spoke on whether the president's move is in line with the constitution or not
Lagos, Nigeria - Richard Akinfele, an oil industry analyst, has examined the new executive order signed by President Bola Ahmed Tinubu, which mandates the direct payment of oil and gas revenues into the Federation Account.
A statement released by presidential aide Bayo Onanuga on Wednesday, February 18, said the move is aimed at strengthening public finances and curbing revenue leakages in the petroleum sector.
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It added that the executive order was signed pursuant to Section 5 of the Constitution and seeks to enforce the federal government’s constitutional ownership and control over mineral resources as provided under Section 44(3).
The directive mandates operators under production sharing contracts to remit Royalty Oil, Tax Oil, Profit Oil and Profit Gas straight to the federation account.
The order, which took effect on February 13, 2026, is designed to reverse what the presidency described as structural and fiscal distortions introduced by the Petroleum Industry Act (PIA).
Tinubu's order appears prudent on surface - Akinfele
Reacting to the development in a treatise sent to Legit.ng, Akinfele noted that with the president's move, Nigeria’s oil and gas industry stands at another pivotal moment. He added that the executive order has reopened fundamental questions about financial autonomy, investor confidence and the long-term sustainability of our national oil company barely three years after the PIA was enacted to stabilise and commercialise the sector.
"On the surface, the move appears fiscally prudent. In a period of revenue pressures and economic strain, ensuring immediate cash flow to federal, state and local governments is understandably attractive. However, public finance gains must be carefully weighed against long-term sectoral stability," the analyst stated.
"The PIA was designed as a structural reset. One of its core objectives was to transform NNPC Limited into a commercially viable and globally competitive energy company. To achieve that, the law granted the company defined revenue-retention mechanisms, including a 30 per cent management fee and allocation of 30 per cent of profit oil and gas for frontier exploration before remittance of balance revenues to the government.
"These provisions were not arbitrary privileges. They were strategic financial tools intended to ensure reinvestment, strengthen upstream capacity, expand gas infrastructure and position Nigeria to compete for global capital in an increasingly competitive energy market."
How Tinubu's EO will affect NNPC - Akinfele
According to Akinfele, President Tinubu's new order will reverse the capacity of the NNPC to have more funds for investment and may force the state oil company to increase external borrowing to finance capital expenditure, a move that carries its own risks.
The analyst said:
"By reversing those retention mechanisms, the new Executive Order significantly reduces the internally generated funds available to NNPC Limited. Estimates suggest that under the original PIA framework, the company could have retained roughly $45 billion over five years under moderate production and price assumptions. Under the new directive, that figure could decline to approximately $15 billion — a potential $30 billion reduction in investable capital.
"This is not a minor technical adjustment. It represents a fundamental alteration of the financial architecture underpinning post-PIA reforms.
"Oil and gas development is capital-intensive. Annual investment requirements are typically in the range of $8–10 billion to sustain production levels, execute upstream projects and develop gas infrastructure. If internal retention falls sharply, the company may be compelled to increase external borrowing to finance capital expenditure.
"That path carries its own risks. Higher borrowing means greater debt servicing obligations, increased exposure to oil price volatility and potential downgrades in credit perception. In an industry already navigating global energy transition pressures, regulatory shifts and geopolitical uncertainty, additional financial strain could weaken competitiveness.
"There are also implications beyond balance sheets. Frontier basin exploration could slow. Project timelines may be delayed. Investor confidence — carefully rebuilt after decades of regulatory instability — could be shaken once again. International investors seek predictability.
"Frequent policy reversals send the opposite signal."
Akinfele examines argument supporting Tinubu's move
Nevertheless, Akinfele acknowledged that the argument by the supporters of the executive order that it enhances fiscal transparency and ensures oil revenues are immediately available for public expenditure deserves consideration.
He said:
"Governments must fund infrastructure, social services and development priorities. Yet the sustainability of those revenues depends on the health of the producing entity. A weakened NNPC Limited may ultimately generate less, not more, for the Federation."
The analyst also weighs in on the constitutionality of President Tinubu's move.
"There is also a constitutional dimension worth examining. The PIA is an Act of the National Assembly. Whether substantive fiscal adjustments of this magnitude can be effectively implemented through executive action alone is a question that policymakers and legal experts must address carefully to avoid future disputes," he said.
"Nigeria’s oil sector has endured decades of uncertainty. The PIA was meant to close that chapter. Introducing major fiscal shifts so soon after its passage risks reopening instability at a time when stability is desperately needed.
"This is not an argument against reform or transparency. It is an argument for coherence, dialogue and strategic consistency. Policymakers, legislators and industry leaders must engage constructively to ensure that short-term fiscal objectives do not compromise long-term sector viability."
The analyst submitted that Nigeria cannot afford to weaken the very institution expected to anchor its energy future.
"The challenge is not merely about revenue remittance; it is about safeguarding the financial foundation upon which sustainable oil and gas development depends," he concluded.
Source: Legit.ng
