NNPC faces liquidity concerns after Tinubu’s oil revenue executive order – Analysts

Analysts have raised concerns that the recent executive order signed by 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 (NNPCL).

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.

**What they are saying **

In an exclusive interview,Dr Muda Yusuf, founder of the Centre for the Promotion of Private Enterprise (CPPE) and former Director-General of the Lagos Chamber of Commerce and Industry (LCCI), expressed concern about the cash-flow implications for NNPCL.

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He noted that the affected revenue streams were previously recognized sources of funding for the company’s operational and financial commitments.

• _“These are major sources of revenue for NNPC. There are ongoing obligations to vendors, to investors… Now that these revenue streams have been taken away, it may also have implications for the capacity or ability of NNPC to continue to function the way it has been functioning.” _

Yusuf warned against subjecting NNPCL to the envelope budgeting system, describing it as bureaucratic and prone to delays.

• “_We don’t want to subject NNPC to this envelope system, which has been characterised by all manner of delays, bureaucracy, and all of that.” _

Similarly, Dr. Joseph Obele, energy expert and National Public Relations Officer of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), 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.

• _“NNPCL and its subsidiaries may experience workforce reductions as part of cost-cutting measures.” _

**More insight **

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 (PIA) 2021.

Among the affected provisions are:

• The 30% Frontier Exploration Fund
• The 30% NNPCL management fee on profit oil and profit gas
• The redirection of gas flare penalties to the Federation Account

Analysts argue that overriding Sections 8, 9, and 64 of the PIA could introduce regulatory uncertainty and elevate investment risk perceptions.

Yusuf emphasized the importance of managing the transition carefully to avoid operational shocks:

• _“Managing that transition to minimise the shock of this revenue transfer on the NNPC operations is very important, because NNPC remains a very strategic institution for the country. _
• _‘’Even as we speak, listening to the deliberations in the National Assembly on the budget, many agencies are even asking to be taken away from the envelope system. So, if we create a situation where NNPC is no longer in a position to fund itself through some of this revenue, that may be a challenge. I’m not saying that is the case, but again, we need to guide against that possibility. _

Obele added that perceived regulatory instability could discourage foreign investors from committing long-term capital to Nigeria’s oil and gas sector.

**What this means **

Despite some concerns expressed by some stakeholders on this executive, the policy also presents potential benefits:

**Potential advantages **

Despite some concerns expressed by some stakeholders about this executive, there are some benefits that can be derived from the policy.

• The implementation of the executive order will increase revenue to the government as centralizing oil and gas revenues into the Federation Account may increase allocations to federal, state, and local governments, thereby strengthening public finance.

This could mean improved transparency and accountability as direct remittance reduces off-budget deductions and enhances public oversight of petroleum revenues.

• It reduces revenue leakages, eliminates certain retained fees, and ring-fenced funds may block financial loopholes and ensure full remittance of national resources.

The executive order may compel NNPCL to operate strictly as a commercial entity, focusing on profitability and cost efficiency, rather than relying on retained government funds.

**Potential risks **

• Liquidity constraints for NNPCL
• Reduced operational flexibility
• Delays under an envelope budgeting system
• Investor uncertainty due to perceived policy inconsistency
• Possible job losses

**What you should know **

The federal government said the executive order signed by the president is designed to realign oil and gas revenue flows with constitutional provisions, curb leakages, and strengthen fiscal transparency amid declining inflows into the Federation Account despite improved production and favourable market conditions.

• It stated that this is to safeguard revenues due to the Federation and prevent deductions at source under existing fiscal arrangements. It explained that the order mandates the direct remittance of taxes, royalties, and profit oil under Production Sharing Contracts to the appropriate fiscal authorities.
• However, organized labour has expressed disapproval of the executive order, thereby rejecting the policy in full.
• The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, argues that the directive threatens staff welfare, operational autonomy, and the financial stability of key institutions, and has called for urgent consultations with the government to reconsider its implementation.

Also, the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) called on President Bola Tinubu to urgently convene a broad-based stakeholders’ meeting to clarify the details of the Executive Order he signed on Wednesday concerning the nation’s oil and gas industry.

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