Dividends from the Nigerian National Petroleum Company (NNPC) Ltd to the federation account, derived from crude oil and gas sales through joint venture assets, dropped from $11.9 billion to $1.83 billion following the full implementation of the Petroleum Industry Act (PIA).
Agora Policy made this known in a report titled “Urgent Need to Amend the PIA to Boost Federation’s Petroleum Revenue,” where it analysed the impact of the PIA on the federation’s revenue from 2021, when the PIA was enacted, to 2023.
The report made a case for a review of the Act, pointing out that it has succeeded in reducing government revenue while allowing the NNPC to take the largest share.
It stated that with the implementation of the PIA, the NNPC has been deducting 60 per cent of profit from oil and gas from Production Sharing Contracts (PSCs).
It further pointed out that Sub-section 54 (1) of the PIA not only grants the NNPC a greater managerial role over the country’s JV oil and gas assets but also gives it sole ownership of these assets.
According to the publication, NNPC’s interpretation of Sub-sections 9 (4) and 64 (c) of the PIA has led to deductions of 30 per cent for a management fee and another 30 per cent for the frontier exploration fund, leaving the Federation with the remaining 40 per cent.
The report further notes that, like JV dividends, there were several months when NNPCL did not remit the 40 per cent balance and also queried why the Federation, as the asset owner, receives only 40 per cent of the profits, and in some instances, nothing at all.
Agora Policy added that beyond the dividends from the sale of crude oil and gas through JV assets to the federation account, the revenue from oil and gas remitted to the federal government has significantly declined due to the stipulations of the PIA.
It said crude oil and gas sales through the NNPC are among the affected revenue streams.
The report indicates that in 2021, prior to the PIA, the Federation’s share from crude oil sales through NNPC totalled $11.308 billion, representing 74.43% of the total sales value of $15.192 billion. The finding further notes that by 2023, after the PIA’s implementation, the Federation’s share from crude oil sales through NNPC dropped to $2.328 billion, or 14.14% of the total sales value of $16.467 billion. The publication highlights that in 2023, the largest share of crude oil sales—$11.348 billion, or 68.91%—went to NNPC.
The analysis emphasizes that this shift occurred despite an 8.39% increase in the value of crude oil sold by NNPC in 2023 ($16.467 billion) compared to 2021 ($15.192 billion), leading to a 79% decline in the Federation’s entitlement, from $11.308 billion in 2021 to $2.328 billion in 2023.
