Nigeria’s Federation Oil Earnings Slump Despite High Prices

Federation oil earnings from Nigerian National Petroleum Company Limited’s Production Sharing Contract profit distribution fell by N78.71bn in March 2026, despite a strong rally in global crude oil prices during the month, an analysis of NNPC reports presented at Federation Account Allocation Committee meetings has shown.

The reports, obtained by Sunday PUNCH, showed that PSC total distribution to the Federation Account dropped from N121.34bn in February 2026 to N42.64bn in March 2026, representing a decline of 64.9 per cent month-on-month. The March 2026 figure was also significantly lower than the N204.96bn recorded in March 2025, indicating a year-on-year drop of N162.33bn or 79.2 per cent.

The decline came despite rising international crude oil prices in March 2026, driven by escalating geopolitical tensions in the Middle East and concerns over disruptions to global oil supply routes.

According to the US Energy Information Administration, Brent crude prices climbed sharply during the first quarter of 2026, crossing the $100 per barrel mark on March 12 and closing the quarter at around $118 per barrel after renewed military tensions in the Middle East and fears surrounding the Strait of Hormuz.

However, the higher prices failed to translate into stronger Federation oil earnings from PSC proceeds.

Further analysis of the reports showed that total PSC distribution in the first quarter of 2026 stood at N180.05bn, compared with N438.54bn in the corresponding period of 2025, indicating a year-on-year decline of N258.49bn or 58.9 per cent. The Q1 2026 figure also fell short of the N592.10bn budget projection by N412.05bn.

Sunday PUNCH further observed that PSC distribution declined from N105.91bn in January 2025 to N16.07bn in January 2026. In February, receipts dipped from N127.67bn in 2025 to N121.34bn in 2026 before plunging further to N42.64bn in March 2026 from N204.96bn in March 2025.

The reports also revealed a major structural change in the distribution framework following Executive Order 9 signed by President Bola Tinubu in 2026.

Under the 2025 structure, PSC profits were shared using the Petroleum Industry Act-prescribed 30:30:40 formula. Out of the N438.54bn PSC profit recorded in Q1 2025, N131.56bn was deducted as NNPC management fee, another N131.56bn was allocated to frontier exploration funds, while only N175.42bn, representing 40 per cent of the total, accrued directly to the Federation Account as the Federation’s share of PSC.

This means NNPC-related deductions totalled N263.12bn in the first quarter of 2025.

However, the 2026 report showed that the Federation’s share of PSC had risen to 100 per cent, with no separate deductions for NNPC management fees or frontier exploration. The report specifically noted that “from February 2026, PSC distribution is in compliance with Executive Order 9 2026.”

Tinubu’s Executive Order 9, signed in February 2026, mandates that oil and gas revenues due to the Federation be remitted directly into the Federation Account, limiting deductions and retentions by agencies and directing that key statutory inflows be paid in full before any spending or appropriation.

The order scrapped the 30 per cent Frontier Exploration Fund under the PIA and discontinued the 30 per cent management fee on profit oil and profit gas retained by the NNPC. Effective February 13, 2026, the directive is intended to safeguard oil and gas revenues and strengthen remittances to the Federation Account.

According to the directive, the President invoked Section 5 of the Constitution of the Federal Republic of Nigeria (as amended), anchored on Section 44(3), which vests ownership and control of all minerals, mineral oils, and natural gas in the Government of the Federation.

Tinubu said excessive deductions, overlapping funds, and structural distortions in the oil and gas sector had weakened remittances to the Federation Account and warned that the practice must end to protect national revenue.

“For too long, excessive deductions, overlapping funds, and structural distortions in the oil and gas sector have weakened remittances to the Federation Account. When revenues meant for federal, state, and local governments are trapped in layers of charges and retention mechanisms, development suffers. That must end,” he said on his verified X handle.

Despite this change, the Federation still earned only N180.05bn in total PSC proceeds in Q1 2026.

This means that although the Federation received the entire PSC distribution in 2026, the amount was only N4.63bn higher than the N175.42bn direct Federation share received in Q1 2025 when the old deduction framework was still in place.

The figures suggest that while the executive order eliminated NNPC deductions and increased the Federation’s share ratio from 40 per cent to 100 per cent, the underlying PSC revenue pool weakened substantially in 2026.

The reports also highlighted a major dividend remittance gap. In Q1 2025, NNPC projected N230.88bn as calendarised interim dividend payable to the Federation Account, but no actual remittance was recorded. In Q1 2026, the projected interim dividend rose sharply to N813.55bn, yet actual remittance remained nil.

As a result, the total projected oil and gas revenue expected from NNPC in Q1 2026 stood at N1.41tn, comprising PSC proceeds and projected dividends. However, actual inflows amounted to just N180.05bn, leaving a massive shortfall of N1.23tn.

The data raises fresh concerns over production levels, timing of crude liftings, cost recovery obligations, remittance cycles, and broader oil sector efficiency, especially at a time when global crude prices were rallying strongly.

Speaking with Sunday PUNCH, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the impact of higher crude prices might not yet have fully reflected in Federation revenues because of transaction and remittance cycles in the oil sector.

“It is too early yet because the transaction cycles for all these exports, getting the money, paying it to the bank, paying it into the Federation Account, those transaction cycles are possibly even more than two months,” he said.

Yusuf added that oil revenue performance was not determined by prices alone, stressing that crude oil production levels also play a critical role.

“Revenue performance is not only about oil prices. It is also about output. It is only recently that we have been hearing that our output is getting close to 1.8 million barrels per day. For a long time, we had not got to that point,” he stated.

The economist further noted that previous forward crude sales arrangements entered into by NNPC to raise funds for refinery rehabilitation might also be limiting the direct inflow of oil windfalls into government accounts.

“We have a lot of forward sales under the previous administration in NNPC. We had forward sales to raise money to rehabilitate the refinery, forward sales of almost $2bn. What that means is that, over time, a proportion of the crude sales has already been mortgaged to defray those debts,” Yusuf said.

According to him, this means not all revenue gains from rising oil prices would immediately accrue to the Federation Account.

“So not all the revenues or windfalls are coming in directly. Some will be used across the middle to offset obligations. Combined, all these contribute to why we are not seeing as much expected impact from what is going on in the oil market,” he added.