Lagos, Nigeria – Analysts have raised concerns that the recent executive order signed by President Bola Tinubu mandating the direct remittance of oil and gas revenues to the Federation Account could significantly affect the liquidity and operational flexibility of the Nigerian National Petroleum Company Limited (NNPC Ltd).
Okay News reports that according to experts, stripping the national oil company of certain revenue retention mechanisms may weaken its ability to meet financial obligations to vendors and investors, and potentially disrupt operations. 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, expressed concern about the cash-flow implications for NNPC. He noted that the affected revenue streams were previously recognised sources of funding for the company’s operational and financial commitments.
Yusuf warned against subjecting NNPC to the envelope budgeting system, describing it as bureaucratic and prone to delays. Similarly, Dr Joseph Obele, energy expert and National Public Relations Officer of the Petroleum Products Retail Outlets Owners Association of Nigeria, speaking in his personal capacity, warned that the move could weaken operational flexibility and discourage long-term capital investment. He added that workforce reductions could follow as part of cost-cutting measures.
The executive order, signed on February 18, mandates the direct remittance of oil and gas revenues into the Federation Account and suspends certain retention mechanisms under the Petroleum Industry Act 2021. Among the affected provisions are the 30 percent Frontier Exploration Fund, the 30 percent NNPC management fee on profit oil and profit gas, and the redirection of gas flare penalties to the Federation Account. Analysts argue that overriding sections of the PIA could introduce regulatory uncertainty and elevate investment risk perceptions.
Yusuf emphasised the importance of managing the transition carefully to avoid operational shocks. He stated that NNPC remains a very strategic institution for the country. If the company is no longer in a position to fund itself through some of this revenue, that may become a challenge. Obele added that perceived regulatory instability could discourage foreign investors from committing long-term capital to Nigeria’s oil and gas sector.
On the potential benefits side, the implementation of the executive order will increase revenue to the government as centralising oil and gas revenues into the Federation Account may strengthen public finance. This could mean improved transparency and accountability as direct remittance reduces off-budget deductions and enhances public oversight. It also reduces revenue leakages by eliminating certain retained fees and ring-fenced funds. The order may compel NNPC to operate strictly as a commercial entity, focusing on profitability and cost efficiency.
However, analysts also pointed to significant risks including liquidity constraints for NNPC, reduced operational flexibility, delays under an envelope budgeting system, investor uncertainty due to perceived policy inconsistency, and possible job losses. The federal government stated that the order is designed to realign oil and gas revenue flows with constitutional provisions, curb leakages, and strengthen fiscal transparency.
Organised labour has expressed disapproval of the executive order, with the President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, Festus Osifo, arguing that the directive threatens staff welfare, operational autonomy, and the financial stability of key institutions. The Nigeria Union of Petroleum and Natural Gas Workers has called on President Tinubu to convene a broad-based stakeholders’ meeting to clarify the details of the executive order concerning the nation’s oil and gas industry. The outcome of ongoing consultations will determine whether these liquidity concerns are adequately addressed or persist as the order takes effect. Sustained liquidity concerns could impact NNPC’s ability to fulfill its obligations and maintain investor confidence.
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