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ABUJA, Nigeria — Eight oil-producing states have taken the Federal Government to court over controversial provisions of the Petroleum Industry Act (PIA) 2021, arguing that the law unlawfully reduces their constitutionally guaranteed revenue from crude oil and gas production.
The states—Delta, Bayelsa, Edo, Anambra, Ondo, Akwa Ibom, Imo, and Abia—are asking the Federal High Court in Abuja to declare unconstitutional sections of the PIA that allow the Nigerian National Petroleum Company Limited (NNPC Ltd) to deduct 60 per cent of revenue from profit oil and profit gas before remitting the balance into the Federation Account.
The suit, filed in June 2023, lists NNPC Ltd, the Federal Ministry of Petroleum Resources, the Attorney General of the Federation, the Accountant General of the Federation, the Federal Ministry of Finance, and the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) as defendants.
Speaking with journalists after Tuesday’s proceedings, lead counsel to the plaintiffs, Barr. Abang Odok Ogar, said the legal action specifically challenges Sections 9 and 64 of the Petroleum Industry Act, insisting that the provisions are inconsistent with Section 162 of the 1999 Constitution of the Federal Republic of Nigeria.
According to Ogar, the disputed sections empower NNPC Ltd to retain 60 per cent of revenue generated from profit oil and profit gas to finance frontier basin exploration activities and management costs, while remitting only the remaining 40 per cent into the Federation Account.
He argued that such deductions significantly reduce the amount available for constitutional revenue sharing, particularly the 13 per cent derivation fund allocated to oil-producing states.
“The Constitution is clear that all revenue generated from crude oil and gas should first be paid into the Federation Account before any distribution is made,” Ogar said.
He maintained that the constitutional provision requires 100 per cent of oil and gas revenues to be paid into the Federation Account before the statutory 13 per cent derivation allocation is calculated and distributed to oil-producing states.
According to him, the current practice under the Petroleum Industry Act has substantially diminished the revenues accruing to the Federation Account, thereby reducing the derivation funds payable to oil-producing states and the communities hosting petroleum production activities.
“The deductions have substantially reduced the revenue accruing to the Federation Account and, by extension, the 13 per cent derivation allocation due to oil-producing states and their communities,” the senior lawyer stated.
The case took another turn during proceedings when counsel representing the Attorney General of the Federation requested additional time to enable all parties explore the possibility of resolving the dispute through an out-of-court settlement.
The Federal High Court granted the application and adjourned the matter until November 2, 2026, directing the parties to report on the outcome of their settlement discussions.
The outcome of the case is expected to have far-reaching implications for Nigeria’s fiscal federalism, constitutional revenue allocation framework, and the implementation of the Petroleum Industry Act. Legal and financial experts believe the court’s eventual decision could redefine the manner in which oil and gas revenues are managed and shared among the Federal Government, oil-producing states, and other beneficiaries of the Federation Account.
Petroleum Industry Act, PIA, Oil-producing States, NNPC Ltd, Federal High Court, Federation Account, 13 Per Cent Derivation, Section 162 Constitution, Nigeria Oil Revenue, Revenue Allocation, Fiscal Federalism, Abang Odok Ogar,
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