Production Sharing Contracts profits hit increase by 665% as Executive Order 9 ends NNPC retention

The implementation of Executive Order 9 has signaled a boost for Nigeria’s revenue generation drive, as the Federation Account recorded a significant increase in profit derived from Production Sharing Contracts (PSCs), which rose to N121.34 billion in February.

BusinessDay’s analysis of the oil and gas revenue distribution figures for February, presented by the Nigerian National Petroleum Company (NNPC) to the Federation Account Allocation Committee (FAAC), showed that the total profit is a 655 percent increase from the N16.07 billion recorded in January.

This reflects the impact of Executive Order 9 signed by President Bola Tinubu, which requires that government oil revenues be paid directly into the Federation Account.

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The order, according to the Presidency, is aimed to safeguard and enhance oil and gas revenues for the Federation, curb wasteful spending, eliminate duplicative structures in this critical sector of the national economy, and redirect resources for the benefit of the Nigerian people.

The Executive Order is anchored on Section 44(3) of the Constitution, which vests ownership, control, and derivative rights in all minerals, mineral oils, and natural gas in, under, and upon any land in Nigeria, including its territorial waters and Exclusive Economic Zone, in the Government of the Federation.

Prior to the EO, NNPC Limited, under the current PIA framework, retains 30 percent of the Federation’s oil revenues as a management fee on Profit Oil and Profit Gas derived from Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts. In addition, the company retains 20 percent of its profits to cover working capital and future investments.

However, the Presidency noted that given the existing 20 percent retention, the additional 30 percent management fee is considered unjustified by the Federal Government, as the retained earnings are already sufficient to support the functions NNPCL performs under these contracts.

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The report presented to FAAC also showed that the year-to-date PSC remittance rose to N137.41 billion, representing a shortfall of N257.32 billion when compared to N394.73 billion PSC revenue expected in the period (January–February).

The report also indicated that the Federation did not receive any interim dividend from the NNPC in the period, even though N542.37 billion was projected as dividend payment for January and February combined.