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MUCH ADO ABOUT EXECUTIVE ORDER 9
Despite some concerns, the order is expected to strengthen fiscal transparency and equity in revenue distribution
The recently issued Executive Order 9 (EO9) by President Bola Tinubu has continued to elicit debates. It mandates all Royalty Oil, Tax Oil, Profit Oil, Profit Gas, and other government entitlements under Production Sharing and related contracts to be paid directly into the Federation Account. It also scrapped the 30 per cent Frontier Exploration Fund under the Petroleum Industry Act (PIA), and stopped the 30 per cent management fee on profit oil and profit gas retained by the Nigerian National Petroleum Company (NNPC) Limited, the state oil company.
In coming up with the EO9, the president invoked Section 5 of the 1999 Constitution of the Federal Republic of Nigeria (as amended). The policy is anchored on Section 44(3), which vests ownership and control of all minerals, mineral oils, and natural gas in the Government of the Federation. And Section 162 which makes it mandatory that revenues accruing to the federation be paid into the Federation Account. Drawing on monthly earnings submitted to the Federation Account Allocation Committee (FAAC), EO9 is expected to boost accruals that would further expand the monthly allocations shared among the three tiers of government: federal, 36 states and 774 local government areas.
The dual role of the NNPC Limited as both a commercial operator and concessionaire under certain arrangement have long presented institutional tensions within the post-PIA framework. For many, this structure undermines the principle of collective ownership of national resources. What EO9 prescribes is for NNPCL, as a limited liability company, to operate independently on its own revenues rather than rely on public funds. Simply put, EO9 is aimed at safeguarding oil and gas revenues due to the three tiers of government and improving remittances into the Federation Account. By correcting this anomaly through EO9, all tiers of government will benefit equitably from the nation’s oil and gas wealth.
Nigeria’s hydrocarbon sector has been in the news largely for wrong reasons, with the characteristic perception of its activities as being shrouded in opacity, sharp practices and endemic corruption. Therefore, the ensuing euphoria from many quarters over the EO9 stems from the fact that it heralds a refreshing departure from decades-long status quo. The EO9 is designed to widen the tax net, improve compliance, make revenue collection more efficient, enforce discipline in the oil and gas sector and stop leakages.
For many, EO9 marks one of the most courageous reforms of the present administration, and a decisive step towards strengthening fiscal transparency and equity in revenue distribution. By the new financial regime, NNPC Limited must remit all management fees and frontier exploration funds, while oil and gas royalties, and gas flaring penalties collected by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will also now be remitted directly to the Federation Account. These are funds to be shared monthly by FAAC, further making the confederating units liquid in terms of cash flows.
However, while EO9 seems to be enjoying more plaudits from a wide spectrum of the society, there have been pockets of dissenting voices and pointers to grey areas. The NUPRC is expected to lose oversight of oil and gas royalty collections, a development that could significantly reduce its revenue from cost-of-collection fees, which are intended to fund its operational activities.
While the concerns raised by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) should be looked into, the Director General, Budget Office of the Federation, Yakubu Tanimu, has also counselled aggrieved parties to approach the courts. That is the way to go. But beyond the legalese, the huge revenues flowing in the oil and gas sector which EO9 seeks to make available to the three tiers of government should not be seen as free funds for some public officials to service their greed.
