NNPC and NUPRC brace for potential funding pressure following Tinubu’s directive

Fresh questions, anxiety, and uncertainty have intensified within key oil and gas institutions following President Bola Tinubu’s executive directive mandating the immediate transfer of oil and gas revenues into the Federation Account for distribution among the three tiers of government.

The order, which effectively ends the retention of certain internally generated revenues by sector agencies, has unsettled officials at the Nigerian Upstream Petroleum Regulatory Commission, the Nigerian National Petroleum Company Limited, and the leadership of the Midstream and Downstream Gas Infrastructure Fund.

Industry operators and experts say the core concern lies in the absence of a clearly defined alternative funding framework for the NUPRC after oil and gas royalties were redirected to the Federation Account. They argue that relying on traditional budgetary allocations approved by the National Assembly would undermine the regulator’s independence and operational efficiency.

Stakeholders warned that subjecting the commission to annual budget approvals and capital releases through the Ministry of Finance could expose it to bureaucratic delays, political interference, and funding uncertainty, potentially weakening its oversight, monitoring, and enforcement responsibilities in the upstream sector.

There are also unresolved questions about how the government plans to sustain and improve Nigeria’s Reserve Replacement Ratio, especially as funding arrangements for frontier exploration activities remain unclear. Concerns have further emerged regarding the future roles and operational scope of Frontier Exploration Services and the Midstream and Downstream Gas Infrastructure Fund, particularly as Nigeria targets crude oil production of about three million barrels per day by 2030 and seeks to attract over $12bn in annual investments.

Senior officials at the NUPRC, who spoke anonymously due to restrictions on public commentary, maintained that the Petroleum Industry Act intentionally established a statutory funding structure to insulate the commission from such constraints and ensure swift decision-making in a highly technical sector.

They referenced provisions of the Act that empower the commission to recruit staff and set competitive remuneration aligned with industry standards, enabling it to attract and retain highly skilled professionals. According to them, the new directive could compromise the commission’s ability to maintain salary parity with international oil companies.

Officials noted that the commission paid approximately N88bn in staff salaries and allowances in 2024 and generated about N322.8bn in 2025 from its four per cent cost-of-collection mechanism, which serves as a primary source of operational funding.
One senior official questioned whether an executive directive could override provisions of an Act passed by the National Assembly, stressing that the cost-of-collection framework is a statutory funding mechanism rather than a discretionary privilege.

He warned that without a clear alternative funding source, the commission’s ability to finance salaries, inspections, monitoring activities, logistics, and staff welfare could be severely affected. Returning the regulator to conventional envelope budgeting, he added, would expose it to delays that could undermine efficiency.

Another senior source cautioned that funding instability could have broader implications beyond administrative challenges. He warned that weakening regulatory capacity in a sector already exposed to oil theft and pipeline vandalism could create security risks and operational vulnerabilities.

He also expressed concern over the suspension of frontier exploration funding, questioning how the government intends to expand reserves and de-risk frontier basins under the new framework. While acknowledging that the government would ultimately need to fund the regulator, he said uncertainty remains over how this would be achieved and how frontier exploration would be sustained going forward.

Concerns at NNPC
Similar unease has been reported within the NNPC, particularly regarding the long-term reform agenda and ongoing discussions about a possible stock exchange listing.

Officials raised questions about how the revenue reallocation would apply to royalties, fees, and production-based payments, which vary by crude type, production level, and contract structure. Senior executives warned that the directive could disrupt production sharing contract operations, affect staff deployment, and send negative signals to investors, especially in deepwater projects.

One official said between 400 and 500 personnel are dedicated daily to managing and overseeing PSC operations across 39 sites, including production monitoring, cost verification, and compliance. He warned that changes to the current framework could undermine oversight mechanisms critical to cost efficiency and transparency.

The official argued that the Petroleum Industry Act was designed to attract deepwater investment and that sudden policy shifts risk creating the impression that laws can be altered without legislative debate. He also clarified that royalties and taxes under PSCs are paid in kind rather than cash, with crude oil lifted and sold before proceeds are remitted to the Federation Account—a process already in place since the PIA took effect.

He cautioned that altering this arrangement could create operational confusion, especially since NNPC acts as the government’s concessionaire in commercial agreements. The official also raised concerns about crude-backed loans, noting that some production volumes are already pledged for debt servicing, and questioned how repayment obligations would be met under the new directive.

According to him, policy uncertainty could weaken investor confidence, particularly as Nigeria pursues multiple deepwater developments. He called for broad stakeholder engagement to clarify the intent and mechanics of the directive and explore alternative revenue-enhancing strategies without destabilising the sector.

Another senior NNPC official adopted a more optimistic stance, saying the company remains stable and capable of adapting to the revised fiscal framework. He said investment priorities and capital allocation were already under review to align with policy changes, while assuring that production, gas processing, and ongoing projects would continue without disruption.

Mixed reactions from stakeholders
Beyond regulatory agencies, the Midstream and Downstream Gas Infrastructure Fund is also expected to be affected, with internal reviews underway to assess how the directive impacts its revenue and remittance structure.

Meanwhile, petroleum marketers welcomed the executive order, describing it as a decisive step toward fiscal discipline, transparency, and accountability. They argued that centralised remittance would strengthen public oversight, improve fiscal stability, and reposition NNPC as a more commercially driven entity.

Labour unions, however, expressed concern. The Nigeria Union of Petroleum and Natural Gas Workers called for an urgent stakeholders’ meeting, citing anxiety among workers over job security, welfare, and the implementation of the Petroleum Industry Act. The union warned that inadequate consultation could fuel unrest and destabilise operations.

In contrast, the Petroleum and Natural Gas Senior Staff Association of Nigeria rejected the directive outright, arguing that it threatens staff welfare, institutional autonomy, and financial stability. The union announced plans for further consultations and internal deliberations.

Despite these objections, implementation has reportedly commenced, with revenues being channelled into designated Federation Account structures. The Federal Government has warned that non-compliance would constitute a violation of a lawful executive directive and constitutional fiscal provisions.

While state governments may benefit from increased allocations, apprehension persists among affected agencies. Attention is now shifting to the National Assembly, where regulatory bodies may seek clarification or legislative intervention, potentially testing the balance between executive authority and statutory independence in Nigeria’s oil and gas sector.

Experts have urged caution, warning that abrupt changes to funding structures could disrupt cash flow, weaken institutional capacity, and undermine investor confidence. They stressed the need for a carefully managed transition that preserves operational continuity, honours contractual obligations, and maintains regulatory effectiveness.

Legal and economic analysts acknowledged constitutional arguments supporting the directive but emphasised that reforms must be implemented in a way that avoids policy instability and operational paralysis. They called for collaboration between the executive and legislature to harmonise laws where necessary and ensure clarity, transparency, and confidence across the sector.