President Tinubu Ends NNPC's 30% Management Fee on Oil and Gas Profits
President Bola Tinubu has taken a decisive step to reform Nigeria's oil and gas sector by eliminating the 30 percent management fee previously retained by the Nigerian National Petroleum Company Limited on profit oil and profit gas. This significant policy shift was announced in a statement issued by the Special Adviser to the President on Information and Strategy, Bayo Onanuga.
Executive Order Restructures Revenue Flows
The decision forms part of a newly signed executive order aimed at restructuring revenue flows within Nigeria's vital oil and gas industry. The primary objective is to ensure greater remittances to the Federation Account, which distributes funds to federal, state, and local governments across the nation.
Before this directive, NNPC Limited was permitted to retain 30 percent of the Federation's oil revenues as a management fee under various contractual arrangements, including Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts. Additionally, the national oil company was already authorized to retain 20 percent of its profits to support working capital requirements and future investments.
Government's Argument Against Dual Deductions
The federal government presented a compelling case against maintaining both deductions. Officials argued that the 30 percent management charge was excessive, particularly in light of the existing 20 percent profit retention already provided for under the framework established by the Petroleum Industry Act.
According to the Presidency, maintaining both deductions resulted in substantial revenue losses to the Federation Account. Cumulative deductions significantly reduced the funds available for distribution to all tiers of government, impacting public services and development projects nationwide.
The executive order, therefore, eliminates NNPC Limited's entitlement to the 30 percent management fee on profit oil and profit gas. Consequently, these revenues will now accrue directly to the Federation Account, enhancing transparency and strengthening public finances.
Concerns Over NNPC's Dual Role
President Tinubu also raised important concerns about the structural role of NNPC Limited under the current arrangement. He noted that the company's dual function as both concessionaire and commercial operator could create market distortions and potentially undermine its transition into a fully commercial enterprise as envisioned under the Petroleum Industry Act.
The broader reform package is intended to reposition NNPC Limited strictly as a commercial entity while simultaneously safeguarding the Federation's revenue interests. The Presidency maintains that these changes are critical for improving transparency, addressing declining net oil revenue inflows, and ensuring the long-term sustainability of Nigeria's public finances.
Implementation and Compliance Measures
To ensure coordinated execution of this directive and monitor compliance across the sector, an inter-ministerial implementation committee has been established. This committee will oversee the transition and ensure that all stakeholders adhere to the new regulations.
Government officials emphasized that this reform underscores the administration's commitment to plugging revenue leakages and enhancing fiscal sustainability amid ongoing economic pressures. The move represents a significant step toward optimizing Nigeria's oil and gas revenue management system.
Recent NNPC Financial Performance
In related developments, NNPC recently reported remitting N12.117 trillion to the federation between January and October 2025. The company recorded N4.358 trillion in revenue and N502 billion in profit after tax during this period.
The national oil company also shared updates on production metrics, noting that oil and condensate output in November averaged 1.6 million barrels per day. Additionally, NNPC disclosed that the AKK and OB3 gas pipelines, which are expected to significantly boost domestic gas supply, were nearing completion and would be prioritized in 2026.
This comprehensive reform initiative represents a major shift in Nigeria's approach to managing its petroleum resources, with potential implications for government revenue, corporate governance in the energy sector, and the broader Nigerian economy.
