EXECUTIVE ORDER ON OIL & GAS REVENUES (2026): CONSTITUTIONAL LIMITS AND IMPLICATIONS FOR THE NIGERIAN PETROLEUM INDUSTRY

INTRODUCTION

The Presidential Executive Order to Safeguard Federation Oil and Gas Revenues and Provide Regulatory Clarity, 2026 (the “Order”) issued on the 13 February 2026 represents a significant executive intervention in Nigeria’s petroleum fiscal framework. Issued pursuant to Section 5 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) (the “Constitution”) and Section 3 (1), (4) and (5) of the Petroleum Industry Act 2021 (“PIA”), the Order seeks to curb revenue leakages, enhance remittances to the Federation Account, and consolidate government revenue from the petroleum sector. At its core, the Order targets what it describes as “off-budget deductions” under the PIA that reduce net inflows to the Federation.

This briefing note examines the potential impact of the Order, while being a legitimate fiscal policy objective, vis-à-vis the express provisions of the PIA. It further contends that key directives of the Order which include the suspension of Frontier Exploration Fund contributions, the redirection of gas flare penalties, and the mandatory direct remittance framework for production sharing entitlements may likely result in legal uncertainty and operational risk for industry participants if not backed by substantive legislative amendments.

KEY DIRECTIVES OF THE ORDER

The Order introduces several fiscal and structural measures aimed at increasing immediate revenue inflows to the Federation Account. Key directives include:

1.    The suspension of the 30% allocation of profit oil and gas to the Frontier Exploration Fund and redirection to the Federation Account.

2.    The removal of the entitlement by the Nigerian National Petroleum Company Limited (“NNPCL”) to retain the 30% management fee on profit oil and profit gas revenues, with full remittance now required to the Federation Account.

3.    The redirection of gas flare penalties from the Midstream and Downstream Gas Infrastructure Fund (“MDGIF”) to the Federation Account.

4.    NNPCL is mandated to operate strictly as a commercial enterprise, removing its dual role as both concessionaire and commercial operator.

5.    The establishment of the Joint Project Team and an Implementation Committee to oversee the execution of these reforms.

Collectively, these measures are designed to enhance immediate revenue availability for distribution among the tiers of government.

CAN THE EXECUTIVE ORDER OVERRIDE OR AMEND THE PETROLEUM INDUSTRY ACT 2021?

A central legal issue arising from the Order is whether the Order can validly override or amend provisions of the PIA, a question this briefing note answers in the negative, for the reasons set out below.

Unlike legislation enacted by the National Assembly, executive orders derive their authority from the President’s executive powers under the Constitution[1] and are primarily instruments for the implementation and administration of existing laws. On a proper construction, Section 5(2)(b) of the Constitution does not confer law-making authority on the executive; rather, it confines the President’s powers to implementing and enforcing existing laws. The Order’s reliance on Section 3(1), (4) and (5) of the PIA is equally tenious. These provisions confer only general supervisory powers on the Minister of Petroleum Resources (the “Minister”)[2], permits the issuance of policy directives to the Nigerian Upstream Petroleum Regulatory Commission (the “Commission”) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority[3] and require such directives to be gazetted[4]. These do not extend to altering or suspending specific fiscal arrangements established under the PIA. The Frontier Exploration Fund under Section 9 of the PIA and the statutory application of gas flare penalties under Sections 52 and 104 of the PIA are clear, detailed provisions forming part of the PIA’s fiscal architecture.

To the extent that the Order purports to suspend or redirect fiscal mechanisms established under the PIA, such as statutory allocations or sector-specific funds, it constitutes, in substance, an indirect amendment of the PIA. This is an exercise beyond the executive’s constitutional power.

That said, the Order may still produce practical and immediate administrative effects. However, such effects remain subordinate to the PIA, contestibleand may only be legally sustainable where they can be interpreted as consistent with, or reasonably incidental to, the PIA’s implementation.

The Supreme Court in President, F.R.N. v. National Assembly[5] held that there is no provision of the Constitution that vests the President with the power to challenge the validity of an Act of the National Assembly that has come into being after his assent or after he had withheld his assent. The only role the Constitution assigns to the President after a law is made is to comply with or enforce it. In Akintokun v L.P.D.C, the Supreme Court held inter alia that the National Assembly is the only body that makes laws for the Federation of Nigeria[6]. If the President is of the view that certain provisions of the PIA are constitutionally infirm, the appropriate remedy is to refer the matter to the National Assembly for legislative amendment and not to circumvent those provisions by executive fiat. Any enduring restructuring of the petroleum fiscal regime must therefore be achieved through formal legislative amendment. This conclusion applies with equal force to each of the specific directives examined below.

UTILISATION OF REDIRECTED FRONTIER FUNDS

While the Order redirects the 30% profit oil and gas allocation earmarked for the Frontier Exploration Fund (“FEF”) under Sections 9(4) and (5) of the PIA to the Federation Account, it is notably silent on the specific purpose or framework for the utilisation of those funds. This silence carries significant legal and policy consequences, as examined below.

Under the PIA, the FEF is a ring-fenced, purpose-driven fund designed to finance exploration activities in frontier basins. The PIA[7] expressly provides for the purpose of the FEF as being dedicated to the development of frontier acreages to carry out exploration and development activities. By contrast, revenues paid into the Federation Account pursuant to the Constitution are subject to general distribution among the three tiers of government and are not tied to any specific sectoral objective. The effect of the Order, therefore, is to convert a targeted development fund into a general revenue pool without a corresponding policy directive on reinvestment in the petroleum sector. A counter-argument may be made that the payment of such revenues into the Federation Account does not, in principle, render them inaccessible for sector-specific purposes. On this view, the Order does not extinguish the possibility of reinvestment in the petroleum sector but relocates it within the broader fiscal framework of governmental spending priorities. That said, the practical limitation of this position lies in the absence of any binding obligation to reallocate such funds to the FEF, thereby exposing the funds to the uncertainties of competing budgetary demands, in contrast to the certainty already provided for under the PIA.

In essence, the absence of a defined utilisation framework increases the risk that the redirected funds may be absorbed into recurrent expenditure, rather than deployed for capital-intensive upstream development. Furthermore, it potentially undermines long-term energy security, as reduced investment in frontier exploration may constrain future reserve replacement and production capacity. Additionally, the PIA[8] mandates the Minister to promote an enabling investment environment in the petroleum sector. The FEF is designed to de-risk and incentivise investment in capital-intensive frontier acreages. The suspension of NNPCL’s 30% contribution to the FEF is therefore difficult to reconcile with this objective and is likely to adversely impact frontier exploration activities. It is our considered view that, the unilateral alteration of a statutory fiscal mechanism upon which investors may have placed reliance raises broader concerns about regulatory predictability and the investment climate in Nigeria’s upstream petroleum sector.

REDIRECTION OF GAS FLARE PENALTIES

The Order further mandates that all penalties imposed for gas flaring be paid into the Federation Account, discontinuing their prior allocation to the MDGIF. The PIA, particularly Sections 52(7)(d) and 104(4), expressly provide that revenues derived from gas flaring penalties are to be applied toward environmental remediation and for the relief of the host communities in respect of which the penalties are levied. The Order therefore does not merely redirect these funds. It diverts them from their statutorily prescribed environmental purpose, a reallocation that requires legislative amendment and cannot be achieved by executive directive.

From a legal standpoint, the directive is inconsistent with express provisions of the PIA, as it alters not merely the destination of the funds, but their intended use, which is clearly prescribed by statute. It can be contended that monies derived from gas flare penalties, once paid into the Federation Account, remain available for subsequent allocation to designated interventions such as the MDGIF. Accordingly, while the Order removes the automatic earmarking of such penalties to the MDGIF, it does not legally preclude the Federal Government from funding the MDGIF from the same revenue stream through budgetary processes. However, this position is weaker in practical terms, as it subjects the MDGIF to fiscal discretion and appropriation priorities, thereby undermining the predictability and ring-fenced nature of funding that the original framework sought to guarantee.

From a policy perspective, the implications are equally significant. Gas flaring penalties serve not only as a revenue source but also as a regulatory and environmental tool, designed to discourage flaring and ensure that funds generated from such activities are reinvested in mitigating environmental harm.

REMITTANCE OF PRODUCTION SHARING CONTRACT, RISK SERVICE CONTRACT AND PROFIT SHARING CONTRACT ACCRUALS

Pursuant to Section 64(c) of the PIA, NNPCL  is authorised to lift and sell royalty oil and tax oil on behalf of the Commission and the Nigeria Revenue Service, for an agreed commercial fee, and to remit the proceeds of profit oil and profit gas to the Federation Account, subject to deductions including the 30% management fee and the 30% allocation to the FEF . The Order now mandates that all revenues accruing from Production Sharing Contracts, Profit sharing Contracts and Risk Service Contracts are to be paid directly into the Federation Account.[9]

CONCLUSION

While the Executive Order reflects a proactive effort to address pressing fiscal challenges within Nigeria’s oil and gas sector, its approach underscores the inherent limits of executive intervention in a statutorily governed regime. The apparent tension between its directives and the provisions of the PIA 2021 highlights the need for coherent, legally grounded reform rather than administrative circumvention. Although the Order may function as an interim fiscal measure and even catalyse necessary legislative amendments, its long-term effectiveness will depend on the willingness of the National Assembly of Nigeria to undertake comprehensive reforms that aligns fiscal efficiency with legal certainty.

In the interest of fiscal certainty and continued investor confidence in the Nigerian petroleum industry, it would be useful for the National Assembly to urgently consider the alignment of the provisions of the PIA with the Order to ensure coherence.

Please do not treat the foregoing as legal advice as it only represents the public commentary views of the authors. All enquiries on this should please be directed at the key contacts