A Step Backward Or A Necessary Correction? Legal And Governance Implications Of Nigeria's Proposed PIA Amendment

Introduction

The Petroleum Industry Act (PIA) 2021 marked a historic milestone in the reform of Nigeria's oil and gas sector, promising transparency, accountability, and efficiency. However, the Federal Government's recent proposal to amend key provisions of the Act has reignited debate among stakeholders. This article critically examines the legal and governance implications of the proposed amendments and assesses whether they represent a necessary policy correction or a step backward in Nigeria's energy reform journey.

Overview of Proposed Amendments

1. Fiscal Rebalancing and Revenue Flow Changes
   
   • Re-routing PSC/contract payments to the Federation Account
     All payments (royalties, tax oil, profit oil, etc.) from existing and future Production Sharing Contracts (PSCs) and similar contracts are proposed to be remitted directly to the Federation Account.¹
   • Reduction or reform of NNPCL's management fees & Frontier Exploration Fund (FEF)
     Under the current PIA, NNPCL retains 30% of profit oil/gas from PSCs as a "management fee," and another 30% is set aside for FEF. The proposed amendment would reduce or eliminate the management fee and change how FEF is funded, instead of an automatic 30% cut. It has been opined that FEF may become subject to annual appropriation by the National Assembly and capped (e.g. 5%) to enhance oversight.²
   • Dividend Payments and Remittances
     The Agora Policy Report revealed that, despite the PIA's requirement for NNPCL to remit dividends and other revenues to the Federation Account, actual remittances have been inconsistent and significantly lower than projected. To address this, the amendment seeks to tighten remittance obligations and introduce enforceable mechanisms to ensure that revenues from NNPCL and joint venture operations are transparently and promptly transferred to the Federation.³
   • Funding of Regulatory Agencies (NUPRC and NMDPRA)
     One of the proposed amendments seeks to increase the Nigerian Midstream and Downstream Petroleum Regulatory Authority's (NMDPRA) funding by granting it an additional 1% of the Nigerian Upstream Petroleum Regulatory Commission's (NUPRC) cost of collection, alongside its existing 0.5% levy on petroleum product sales. Critics argue this is unnecessary and could foster inefficiency, as the NMDPRA already receives significant allocations through the Federation Account and other revenue sources.⁴
2. Ownership & Governance Restructuring
   
   • MOFI (Ministry of Finance Incorporated) as sole shareholder of NNPCL
     Currently, NNPCL is jointly owned by the Ministry of Finance Incorporated (MOFI) and the Ministry of Petroleum Incorporated (MOPI). The amendment seeks to make MOFI the sole shareholder, removing MOPI from ownership.⁵
   • Transferring the concessionaire role from NNPCL to NUPRC
     The proposed changes include making the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the government's representative/concessionaire in PSCs, Profit Sharing, Risk Service Contracts. That means NNPCL would no longer hold that role in such contracts.⁶
3. Regulatory & Institutional Adjustments over integrated upstream–midstream operations
   Under the Petroleum Industry Act 2021, overlaps often occur between the NUPRC and NMDPRA in regulating integrated upstream–midstream facilities. Although a recent presidential directive vested primary control in the NUPRC, the amendment proposes joint oversight of integrated upstream–midstream projects by both the NUPRC and NMDPRA, rather than leaving authority solely with the NUPRC. While this aims to enhance coordination and reduce inter-agency friction, it also raises concerns about efficiency, accountability, and possible regulatory duplication.⁷
4. Environmental & Host Community / Penalties Adjustments
   Under the proposed amendment, revenues from gas flaring penalties would no longer be reserved for environmental remediation and host community relief. Instead, they would be paid directly into the Federation Account for general distribution. Critics warn that this shift could undermine environmental accountability and dilute the PIA's commitment to addressing the ecological and social impacts of gas flaring on affected communities.⁸

Legal and Governance Implications

1. Revenue centralisation vs. contractual stability
   Requiring all PSC/contract-derived payments to flow directly into the Federation Account aims to curb opaque deductions and revenue leakages. However, it can collide with existing contract terms and stabilisation clauses, and thus, transition mechanisms will be critical to avoid litigation or investor pushback.
2. Reforming NNPCL's funding mechanics
   The proposed reduction of NNPCL's 30% management fee and the restructuring of Frontier Exploration Fund (FEF) allocations is aimed at increasing legislative oversight, correcting the principal–agent imbalance, and enhancing the Federation's revenue share. Legally, these changes require clear amendments to the PIA to avoid ambiguity and must respect PSC stabilisation clauses and corporate governance obligations to prevent disputes. From a governance perspective, the reforms strengthen fiscal transparency and accountability, ensuring a greater portion of oil revenues flow to the Federation. However, reducing automatic FEF allocations could weaken predictable funding for frontier basin exploration, potentially affecting long-term upstream investment, and therefore must be managed carefully to balance revenue oversight with continued sector growth.
3. Tightening Dividend Remittance Obligations
   The proposed changes seek to ensure that dividends and other revenues from NNPCL and joint ventures are remitted to the Federation more consistently, addressing past delays and gaps. While this is important for transparency and fiscal accountability, it must be done in a way that does not compromise NNPCL's ability to reinvest in its operations or limit its commercial flexibility. Clear rules and coordinated oversight will be essential to achieve a balance between accountability and the company's operational needs.
4. Ownership and Concessionaire Realignment
   Vesting full NNPCL ownership in MOFI centralises fiscal oversight, strengthening accountability but shifting focus from petroleum policy guidance, a role previously balanced by MOPI's participation. Replacing NNPCL with NUPRC as PSC concessionaire removes the 30% management fee and addresses the principal–agent imbalance, as NNPCL currently benefits disproportionately from revenues while the Federation receives a smaller share. However, this raises corporate governance concerns, since NUPRC would act as both regulator and government representative, creating potential conflicts of interest. Strong accountability measures and transparency are essential to preserve regulatory impartiality while enhancing fiscal control and investor confidence.
5. Joint Regulation of Integrated Upstream–Midstream
   Shifting to dual oversight by NUPRC and NMDPRA is intended to improve coordination and reduce inter-agency friction. However, without clearly defined roles, it risks duplication of responsibilities, slower decision-making, and loss of efficiency in project approvals.
6. Reassigning Gas-Flaring Penalty Revenues
   Channeling penalty revenues to the Federation Account may strengthen federal fiscal control, but it comes at the expense of the polluter-pays principle. This change could weaken accountability, reduce resources for environmental and host-community projects, and erode trust within affected communities.

Conclusion

The proposed amendments to the Petroleum Industry Act appear designed to strengthen fiscal control, improve revenue accountability, and correct the imbalance between the Federation and NNPCL in the management of PSC revenues. In this light, they can be seen as a necessary adjustment to ensure that oil revenues are more transparently and effectively managed.

At the same time, these changes risk undermining some of the original intent of the PIA, which sought to provide clear institutional roles, maintain commercial autonomy for the national oil company, and create predictability for investors.

Centralising revenue flows, changing concessionaire roles, and redirecting penalty funds could create governance issues, like conflicts of interest or unclear accountability, as well as operational difficulties, including slower approvals, reduced funding predictability, and potential concerns for investors if not carefully implemented.

Whether these proposed amendments are a step backward or a necessary correction will depend on how well their implementation balances fiscal oversight, strong governance, and investor confidence in Nigeria's oil and gas sector.

Footnotes

1. Waziri Adio, "On the Proposed Amendments to the PIA", ThisDay Live (5 October 2025) in https://www.thisdaylive.com/2025/10/05/on-the-proposed-amendments-to-the-pia/ (accessed 7 October 2025)..

2. Ibid.

3. Emmanuel Addeh, "With Federation Petroleum Accruals Falling from $11.9 bn to $1.83 bn, Agora Demands Urgent Amendment of PIA," ThisDay Live (7 October 2024) in https://www.thisdaylive.com/2024/10/07/with-federation-petroleum-accruals-falling-from-11-9bn-to-1-83bn-agora-demands-urgent-amendment-of-pia/ (accessed 7 October 2025).

4. Waziri Adio, "On the Proposed Amendments to the PIA", ThisDay Live (5 October 2025) in https://www.thisdaylive.com/2025/10/05/on-the-proposed-amendments-to-the-pia/ (accessed 7 October 2025)..

5. Abdullateef shuaibu," Experts caution against PIA amendment", Daily Trust (1st October 2025) in https://dailytrust.com/experts-caution-against-pia-amendment/ (accessed 7 October 2025).

6. Ibid

7. "Nigerian President Advances Oil Bill Placing NNPCL under Control of Finance Ministry, Upstream Regulator" Intelli News (7 October 2024) in https://www.intellinews.com/nigerian-president-advances-oil-bill-placing-nnpcl-under-control-of-finance-ministry-upstream-regulator-401485/ (accessed 7 October 2025).

8. Waziri Adio, "On the Proposed Amendments to the PIA", ThisDay Live (5 October 2025) in https://www.thisdaylive.com/2025/10/05/on-the-proposed-amendments-to-the-pia/ (accessed 7 October 2025).

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