The Nigerian National Petroleum Company Limited (NNPCL) is withholding a staggering $11.3 billion in revenue from the federation, remitting a just $2.3 billion following the implementation of the Petroleum Industry Act (PIA).  
 
There is also worry that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) may face off with NNPCL over N3.4 trillion royalties as well as gaps in the implementation of Frontier Exploration Fund (FEF).
 
In a latest publication by the Agora Policy, Professor of Economics and senior fellow with Agora Policy, Babajide Fowowe, called for urgent reforms to safeguard Nigeria’s dwindling oil and gas revenue.
 
NNPCL’s withholding of such substantial funds is a reflection of deep-seated issues within the framework of the PIA, a law designed to overhaul Nigeria’s petroleum sector. However, two years after its passage, Agora insisted that instead of enhancing revenue for the federation, the law is inadvertently funnelling more resources to the NNPCL, to the detriment of the country’s coffers.  
 
Agora Policy, in its latest report, highlighted critical areas where the PIA needs revision to increase the federation’s share of revenue, particularly from joint ventures (JVs) and Production Sharing Contracts (PSCs).
 
Fawowe’s detailed analysis showed that the ambiguities in the interpretation of key sections of the PIA, which allowed NNPCL to hold on to a substantial portion of revenue from oil and gas sales, must be reviewed.
 
According to the Agora report, these misinterpretations centre on two crucial areas; the transfer of JV assets to NNPCL in Section 54(1) of the PIA allows NNPCL to acquire the federation’s JV assets. This, the report noted, significantly reduced the government’s ability to benefit from these assets, as the national oil company, now operating as a private entity, retains control of what was once federation property.
 
The second concern borders on the management fees and FEF, which is in Sections 9(4) and 64(c) of the PIA. The sections grant NNPCL the right to deduct 30 per cent from the federation’s profit on oil and gas for management fees, and another 30 per cent for the FEF.  
 
The report noted that this dual deduction resulted in NNPCL retaining up to 60 per cent of profits, leaving the federation with a significantly reduced share of the proceeds.
 
Agora Policy’s analysis shows that before the PIA took effect in 2021, the federation’s entitlement from crude oil sales through the NNPCL amounted to $11.3 billion (74.4 per cent) of the total sales.  
 
However, by 2023, as the PIA came into force, the federation’s entitlement dropped sharply to $2.3 billion, or 14.1 per cent of the total sales of $16.5 billion. Conversely, NNPCL’s take from crude oil sales surged to $11.3 billion (68.9 per cent of the total value), sparking concerns about the fairness of the PIA’s revenue-sharing provisions.
 
Given the massive revenue losses, Agora Policy proposed urgent amendments to the PIA to rectify these disparities and boost the federation’s revenue. It suggests revisiting Section 54(1) to ensure that the federation regains ownership of JV assets, rather than leaving them under NNPCL’s control, adding that this would realign the balance of revenue towards the Federal Government.
 
It also noted that current regulations, which allow NNPCL to deduct 30 per cent of profits as a management fee remained excessive and must be reduced to between four per cent and seven per cent in line with the collection fees retained by other revenue-generating agencies such as the Federal Inland Revenue Service (FIRS).
 
Agora asked President Bola Tinubu, in his capacity as Petroleum Resources Minister, to reassess the priority of frontier exploration, adding that the country’s fiscal realities do not support committing huge capital expenditure to frontier basins at this time, especially given the financial strain on other critical sectors.
 
It noted that the ambiguous language in Sections 9(4) and 64(c) allowed NNPCL to withhold excessive funds needs a thorough review, including the related Frontier Exploration Fund Administration Regulations 2022, to ensure proper allocation of petroleum revenue.
 
The report stresses that as NNPCL manages critical national assets, it should be subject to the same level of oversight as public agencies, despite its status as a private entity. This would improve transparency and accountability, particularly at the Federation Account Allocation Committee (FAAC) meetings, where NNPCL’s remittances have been a contentious issue.
 
Tensions between the NNPCL and NUPRC are also escalating, particularly over the management of a N3.4 trillion backlog of royalties from oil and gas operations, it noted.
 
Since the passage of the PIA, Agora said, NUPRC has been unable to secure these funds, which NNPCL continued to withhold, stressing that there could be looming conflict that would strain relations between the two bodies, with both claiming authority over key aspects of oil exploration and revenue collection.
 
The PIA gives NNPCL authority over the management of frontier exploration, yet the same law also assigns responsibilities to the NUPRC in this area. This has created operational grey areas, which Agora warns could lead to a significant clash. 
 
Notably, NUPRC’s post-PIA regulations have sought to establish its control over FEF through the creation of an escrow account, but it remains unclear whether NNPCL will comply with the commission’s demands for contributions, the report noted.
 
Agora said one of the most contentious issues surrounding NNPCL’s transition from a public corporation to a private company under the PIA has been the lack of transparency in its operations.
 
It argued that instead of improving efficiency and accountability, the company continued its long history of opaqueness. For instance, NNPCL consistently failed to provide updates on its Government Priority Projects (GPPs) despite repeated requests from FAAC. Between 1999 and July 2022, then NNPC withheld N1.1 trillion in revenue for these projects, but it has yet to fully account for their implementation, with FAAC unable to even verify their locations.
 
Further, NNPCL’s remittances to the federation have been alarmingly low compared to other revenue-generating agencies.  Between June 2022 and June 2024, NNPCL failed to deposit any fund into the federation account for 13 of the 25 months, and when it did remit, the contributions often constituted less than 14 per cent of total payments from all agencies.  In May and June 2024, for example, NNPCL contributed less than one per cent to total payments, raising serious concerns about its financial management.