Dividends from the Nigerian National Petroleum Company (NNPC) Limited to the federation account have dropped significantly following the full implementation of the Petroleum Industry Act (PIA), with crude oil and gas sales earnings through joint venture (JV) assets plummeting from $11.9 billion to $1.83 billion. This sharp decline was revealed in the Agora Policy Report, which assessed the impact of the PIA on Nigeria’s petroleum revenue from 2021 to 2023.
The report, titled “Urgent Need to Amend the PIA to Boost Federation’s Petroleum Revenue,” calls for a review of the PIA, citing its unintended consequences on government revenue. It suggests that while the Act was expected to enhance the country’s petroleum earnings, it has instead led to a disproportionate share of profits being retained by NNPC.
Increased NNPC Control and Profit Share Under PIA
The report outlines how Sub-section 54 (1) of the PIA grants the NNPC greater control over Nigeria’s JV oil and gas assets, effectively giving the company sole ownership. As a result, the NNPC has been deducting 60% of profits from oil and gas production-sharing contracts (PSCs), with 30% allocated as management fees and another 30% set aside for the frontier exploration fund. This leaves the federation with just 40% of the revenue—and, in several instances, no remittance at all.
The publication also questions the fairness of this arrangement, arguing that the federation, as the asset owner, should receive a larger share of the profits from its oil and gas resources.
Steep Decline in Government Oil and Gas Revenue
The analysis highlights the significant decline in government revenue following the enactment of the PIA. Before the PIA, the federation’s share from crude oil sales through NNPC amounted to $11.308 billion in 2021, representing 74.43% of total sales. However, by 2023, this figure had fallen to just $2.328 billion—only 14.14% of total sales.
Despite an 8.39% increase in the value of crude oil sold by the NNPC in 2023, from $15.192 billion in 2021 to $16.467 billion, the federation’s earnings from these sales dropped by 79%, as NNPC retained the majority share of $11.348 billion (68.91%) in 2023.
Calls for Amendments to the PIA
The Agora Policy Report argues that these outcomes contradict the intended goals of the PIA and recommends revisiting key sections of the Act. It specifically highlights the need to amend:
1. Sub-section 54 (1): The provision that allows NNPC to control JV assets.
2. Sub-sections 9 (4) and 64 (c): Provisions that allow NNPC to deduct 30% for management fees and another 30% for the frontier exploration fund, severely reducing the federation’s share.
The report concludes that without these revisions, the PIA will continue to undermine government revenue from the petroleum sector, falling short of the anticipated financial benefits.
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