Oil-Producing States Sue FG Over PIA Revenue Deductions, Court Adjourns for Settlement Talks

By Maryam Aminu

Eight oil-producing states have asked the Federal High Court in Abuja to nullify provisions of the Petroleum Industry Act (PIA) 2021 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 to the Federation Account, arguing that the practice has significantly reduced their constitutional derivation earnings.

The suit, instituted in June 2023 by Delta, Bayelsa, Edo, Anambra, Ondo, Akwa Ibom, Imo and Abia states, is against 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.

Speaking after Tuesday’s proceedings, lead counsel to the plaintiffs, Barr. Abang Odok Ogar of Abang Odok Ogar & Co, said the action challenges Sections 9 and 64 of the Petroleum Industry Act, insisting that the provisions are inconsistent with Section 162 of the 1999 Constitution.

Ogar explained that the disputed sections empower 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, from which the constitutionally guaranteed 13 per cent derivation for oil-producing states is calculated.

He argued that the Constitution mandates that 100 per cent of revenue generated from crude oil and gas sales be paid into the Federation Account before the derivation allocation is distributed.

“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,” Ogar stated.

At the hearing held on July 7, counsel representing the Attorney General of the Federation, the fourth defendant, sought a further adjournment to enable parties explore an out-of-court settlement.

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