Fiscal Centralisation in Nigeria: Legal Implications of The New Oil Revenue Directive

CONTRIBUTOR: IFEDIORA OBIORA CHISOM

Introduction

On 13 February 2026, the President of the Federal Republic of Nigeria signed Executive Order No 9 of 2026 into law.^[1] The issuance of the Executive Order sparked significant debate among energy and infrastructure stakeholders, many of whom questioned its rationale and legality.^[2]

Several commentators argued that the President, through the Executive Order, sought to override statutory provisions enacted by the National Assembly. Nigerian courts have consistently held that executive orders cannot supersede the clear provisions of an Act of the National Assembly.^[3] Nonetheless, the Government appears to have introduced the directive to eliminate revenue leakages within the petroleum sector and prevent agencies such as the Nigerian National Petroleum Company (NNPC) Limited from retaining proceeds derived from oil and gas operations.^[4] Under the new directive, such revenues must be remitted directly into the Federation Account, notwithstanding statutory deductions authorised under existing legislation.

The Executive Order has undoubtedly generated concern among stakeholders within the petroleum industry. Given the need for legal and commercial clarity, this article examines the fiscal centralisation introduced by the directive. It analyses the commercial and legal implications of the policy and considers whether the presidential directive unlawfully encroaches on the National Assembly’s legislative powers.

The article concludes by recommending measures to address the inconsistencies arising from the coexistence of the Executive Order and existing statutes, particularly the Petroleum Industry Act.^[5]

Key Provisions of the Executive Order

1. The Executive Order mandates the direct remittance of all Federal Government entitlements, including royalty oil, tax oil, profit oil and profit gas, into the Federation Account.^[6]
2. It suspends the power of NNPC Limited to collect and manage the 30 per cent allocation of profit oil and profit gas previously earmarked for the Frontier Exploration Fund (FEF). It directs that such revenues be remitted to the Federation Account instead.^[7]
3. The Executive Order further suspends the payment of the 30 per cent allocation of profit oil and profit gas revenue to NNPC Limited for the administration of production-sharing, profit-sharing and risk-service contracts. It instead requires that such funds be paid directly into the Consolidated Revenue Fund of the Federation.^[8]
4. The directive also requires NNPC Limited, in its capacity as concessionaire under production-sharing contracts, to transfer all profit oil and profit gas revenues recovered from such arrangements into the Federation Account.^[9]
5. In addition, the Executive Order directs the Commission to discontinue remitting gas-flaring penalties to the Midstream and Downstream Gas Infrastructure Fund and instead remit such proceeds to the Federation Account.^[10]
6. Finally, the Executive Order mandates the Commission and the Authority to establish a Joint Project Team (JPT) to regulate integrated petroleum projects that cannot be separated into distinct operational domains, with the Commission serving as the primary interface on matters relating to licences and leases.^[11]

Legal and Commercial Implications of Key Provisions on Petroleum Operations

• Uncertainty Regarding the Status of Statutory Deductions under the Petroleum Industry Act 2021

The Constitution clearly vests ownership and control of petroleum resources in the Federal Government. More specifically, it provides that all income or proceeds derived from petroleum resources must be paid into the Consolidated Revenue Fund of the Federation.^[12] Accordingly, by directing the remittance of petroleum revenues into the Federation Account, the Executive Order largely reinforces the existing constitutional position.^[13]

Although the directive appears to restate established constitutional principles, it nonetheless creates uncertainty within the framework established by the Petroleum Industry Act 2021 (PIA), particularly regarding statutory deductions retained by NNPC Limited for infrastructure and sectoral development. This concern is especially relevant to the provisions establishing the FEF and the Midstream and Downstream Gas Infrastructure Fund.^[14]

The Executive Order, therefore, raises a significant legal question: since an executive directive cannot amend or override statutory provisions enacted by the National Assembly, do these statutory deductions under the Petroleum Industry Act remain legally valid notwithstanding the presidential directive? The uncertainty surrounding this issue calls for urgent judicial clarification, as prolonged ambiguity may adversely affect ongoing and prospective energy infrastructure projects.

• Suspension of Funding for Frontier-Basin Exploration Activities

As earlier noted, one of the innovative provisions of the Petroleum Industry Act is the establishment of the FEF.^[15] Under the PIA, NNPC Limited is entitled to retain 30 per cent of profit oil and profit gas derived from production-sharing arrangements for the purpose of financing frontier basin exploration activities.

If implemented, the Executive Order would effectively suspend the statutory allocation earmarked for funding the FEF. This would likely disrupt or halt frontier exploration activities already initiated by NNPC Limited in various frontier basins across the country, particularly because the Petroleum Industry Act does not provide any alternative funding mechanism for the FEF outside the statutory deductions allocated to NNPC Limited.

The Executive Order, therefore, raises a fundamental commercial and operational concern: in the absence of the statutory deductions provided under the Petroleum Industry Act, how would NNPC Limited finance frontier exploration activities already contemplated by the PIA? The uncertainty surrounding this issue may discourage investment in frontier exploration projects and undermine the long-term objective of expanding Nigeria’s petroleum reserves.

• Suspension of Gas-Flaring Penalties as a Significant Source of Funding for the Midstream and Downstream Gas Infrastructure Fund

The Midstream and Downstream Gas Infrastructure Fund (MDGIF) was established under the Petroleum Industry Act to support the Federal Government’s gas development initiatives.^[16] Although the Fund draws financing from multiple sources, the PIA specifically requires the Nigerian Upstream Petroleum Regulatory Commission (the Commission) to remit gas-flaring penalties into the MDGIF. This arrangement also aligns with the Government’s environmental remediation objectives, particularly in addressing environmental harm caused by gas flaring.^[17]

However, under the Executive Order, gas-flaring penalties would no longer be remitted to the MDGIF but would instead be paid directly into the Consolidated Revenue Fund of the Federation. While the MDGIF may continue to receive funding from other statutory sources, such sources may prove insufficient to sustain the Government’s gas infrastructure and utilisation initiatives. Gas-flaring penalties constitute a significant source of funding because the law intentionally imposes substantial financial penalties on petroleum operators engaged in gas flaring.^[18]

Consequently, removing gas-flaring penalties as a funding source for the MDGIF may adversely affect the Government’s gas development and utilisation strategy, particularly in relation to infrastructure expansion, environmental remediation and energy transition objectives.

• Joint Project Teams and Integrated Petroleum Projects

One notable legal implication of the Executive Order concerns the regulation of integrated petroleum projects that span the upstream, midstream, and downstream sectors of the industry.^[19] The Executive Order directs both the Commission and the Midstream and Downstream Regulatory Authority to establish a JPT to regulate and coordinate such integrated petroleum projects.^[20]

This directive acknowledges that certain petroleum projects span multiple regulatory streams and cannot be effectively regulated within a single sector. Accordingly, rather than subjecting such projects exclusively to upstream or downstream regulatory procedures, the Executive Order requires the relevant regulatory bodies to collaboratively develop the guidelines and modalities for implementing integrated projects.^[21]

The directive may significantly reduce regulatory uncertainty, particularly regarding the applicable regulatory regime for projects that span multiple segments of the petroleum industry. It may also minimise bureaucratic delays in project execution, as the relevant regulatory authorities would collaboratively determine timelines, compliance requirements and operational procedures from the outset.

To that extent, the establishment of Joint Project Teams appears to be one of the most practical and progressive innovations introduced by the fiscal centralisation framework under the Executive Order.

Conclusion

Executive Order No 9 of 2026 does not appear to constitute an attempt to repeal or override legislative provisions through executive fiat. Rather, the directive seeks to reinforce the constitutional principle that ownership and control of petroleum resources vest exclusively in the Federation and that revenues derived therefrom must accrue to the Federation Account.

Notwithstanding the legitimacy of its objectives, the coexistence of the Executive Order and certain provisions of the PIA has created notable legal and commercial uncertainties, particularly regarding statutory deductions, sectoral funding arrangements and regulatory implementation. It is therefore recommended that the National Assembly amend the relevant provisions of the PIA to align the statutory framework with the constitutional objectives reflected in the Executive Order.

In addition, the courts should adopt a purposive and harmonised interpretation of the Constitution, the PIA and the Executive Order to ensure regulatory certainty within the petroleum industry. Such judicial clarity would reassure investors and operators and prevent uncertainty regarding the scope and effect of the respective legal instruments.

REFERENCE: Executive Order No 9 of 2026, fiscal centralisation, PIA, Frontier Exploration Fund, Midstream and Downstream Gas Infrastructure Fund, gas-flaring penalties, petroleum revenue remittance, integrated petroleum projects, Joint Project Team, petroleum regulation in Nigeria.

1. Tope Adebayo, ‘Legal Essence of Executive Order 9, 2026, Oil, Gas Revenues’ (The Nation Online, 24 March 2026) <https://www.google.com/amp/s/thenationonlineng.net/legal-essence-of-executive-order-9-2026-oil-gas-revenues/amp/> accessed 21 April 2026. ↑
2. Ibid. ↑
3. Elephant Group PLC v National Security Adviser [2018] LPELR-45528 (CA) 85. ↑
4. Adebayo n1. ↑
5. The Petroleum Industry Act (No 6) of 2021. ↑
6. The Presidential Executive Order to Safeguard Federation Oil and Gas Revenues’ and Provide Regulatory Clarity 2026, Para 1. ↑
7. Ibid para 2(1). ↑
8. Ibid n5 para 2(2). ↑
9. Ibid para 2(3). ↑
10. Ibid para 3. ↑
11. Ibid Para 4. ↑
12. The Constitution of the Federal Republic of Nigeria (as amended) 1999, S 162. ↑
13. Ibid. ↑
14. The Petroleum Industry Act 2021, s9(4) and 52 (7) (d). ↑
15. The Petroleum Industry Act 2021, s 9 (4). ↑
16. The Petroleum Industry Act 2021, s57(7)(d). ↑
17. Ibid. ↑
18. Adebayo n1. ↑
19. The Presidential Executive Order to Safeguard Federation Oil and Gas Revenues’ and Provide Regulatory Clarity 2026 (No 9), Para 4. ↑
20. Ibid. ↑
21. Ibid. ↑