Eight Oil-Producing States Challenge PIA at Court, Seek End to NNPC’s 60% Oil Revenue Deductions

Eight oil-producing states have instituted a legal challenge against the Federal Government and the Nigerian National Petroleum Company Limited (NNPC Ltd), asking the Federal High Court in Abuja to nullify provisions of the Petroleum Industry Act (PIA) 2021 that permit the national oil company to deduct 60 per cent of revenue from profit oil and profit gas before remitting funds to the Federation Account.

The plaintiffs — Delta, Bayelsa, Edo, Anambra, Ondo, Akwa Ibom, Imo and Abia states — filed the suit in June 2023 against NNPC Ltd, the Federal Ministry of Petroleum Resources, the Attorney General of the Federation (AGF), the Accountant General of the Federation, the Federal Ministry of Finance, and the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC).

The states are seeking a declaration that Sections 9 and 64 of the Petroleum Industry Act are unconstitutional, arguing that they conflict with Section 162 of the 1999 Constitution governing the management and distribution of revenues accruing to the Federation.

Addressing journalists after Tuesday’s proceedings, lead counsel to the plaintiffs, Barrister Abang Odok Ogar of Abang Odok Ogar & Co., said the disputed provisions allow NNPC Ltd to retain 60 per cent of revenue from profit oil and profit gas for exploration activities and management fees while remitting only 40 per cent into the Federation Account.

According to him, the constitutional provision requires that all revenue generated from crude oil and gas sales be paid into the Federation Account before any deductions or statutory allocations, including the 13 per cent derivation due to oil-producing states, are made.

“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 host communities,” Ogar said.

At the hearing, counsel representing the Attorney General of the Federation requested an adjournment to enable the parties explore an amicable resolution through out-of-court settlement.

The Federal High Court granted the application and adjourned the matter until November 2, 2026, when parties are expected to update the court on the outcome of the settlement discussions.

The case is expected to test the legality of key fiscal provisions of the Petroleum Industry Act and could have significant implications for revenue sharing between the Federal Government and oil-producing states if the court eventually rules in favour of the plaintiffs.