Nigeria’s Federation Account received full remittances of profit from Production Sharing Contracts (PSCs) from the Nigerian National Petroleum Company Limited (NNPC Ltd.) in February.
Data from NNPC’s February oil and gas revenue distribution presented to the Federation Account Allocation Committee (FAAC) showed that the federation received the entire PSC profit for the month.
Before the issuance of the executive order, it was reported that only 40 per cent of PSC profit was remitted to the federation account.
The development signals the commencement of the implementation of President Bola Tinubu’s Executive Order 9 on oil revenue remittances, signed in February. The directive requires that government oil revenues be paid directly into the federation account.
According to the latest oil and gas revenue distribution data, NNPC remitted N121.34 billion to FAAC as PSC revenue in February. The figure represents an increase of over 100 per cent from the N16.07 billion recorded in January, bringing the year-to-date PSC remittance to N137.41 billion.
Executive Order
On 18 February, Mr Tinubu signed the order directing that royalty oil, tax oil, profit oil, profit gas and other revenues due to the federation under production-sharing, profit-sharing and risk-service contracts be paid directly into the federation account.
The order also scrapped the 30 per cent Frontier Exploration Fund established under the Petroleum Industry Act (PIA) and discontinued the 30 per cent management fee on profit oil and profit gas previously retained by NNPC.
The implementation of the order effectively terminates NNPC’s powers to deduct oil and gas revenues before remitting them to the federation account.
While many experts have welcomed the directive, some analysts have criticised the move, arguing that it may contravene provisions of the PIA signed by Mr Tinubu’s predecessor, former President Muhammadu Buhari.
The directive was also criticised by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), which described it as a dangerous precedent that could undermine the PIA and weaken investor confidence in the sector.
However, the presidency defended the order, describing it as a constitutional instrument aimed at safeguarding public revenues rather than an attempt to usurp the powers of the National Assembly.
Remittances still below projections
Despite the increase in February inflows, overall remittances remain significantly below projections.
The FAAC data shows that N394.73 billion in PSC revenue was budgeted for the first two months of the year, leaving an actual shortfall of about N257.32 billion.
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The report also indicates that the federation did not receive any interim dividend from NNPC between January and February.
Although N542.37 billion was projected as dividend payments for the two months, no remittance was recorded during the period.
As a result, total oil and gas revenue fell sharply short of budget expectations. While the budgeted revenue for the period stood at N937.10 billion, the actual remittance amounted to N137.41 billion, leaving a variance of about N799.69 billion.