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ABUJA – A major legal battle over Nigeria’s oil revenue sharing formula has intensified as eight oil-producing states seek a judicial interpretation of provisions of the Petroleum Industry Act (PIA) 2021, arguing that the law unlawfully diminishes their constitutional revenue allocations.

The states—Delta, Bayelsa, Edo, Anambra, Ondo, Akwa Ibom, Imo, and Abia—have instituted a suit before the Federal High Court in Abuja, challenging the legality of Sections 9 and 64 of the Petroleum Industry Act, which permit the Nigerian National Petroleum Company Limited (NNPC Ltd) to deduct 60 per cent of revenue from profit oil and profit gas before remitting the remaining 40 per cent into the Federation Account.

The suit, filed in June 2023, names 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.

Addressing journalists after Tuesday’s court proceedings, lead counsel to the plaintiffs, Barr. Abang Odok Ogar, said the states are asking the court to declare the disputed provisions unconstitutional because they conflict with Section 162 of the 1999 Constitution.

According to Ogar, the challenged sections authorize NNPC Ltd to retain 60 per cent of revenue generated from profit oil and profit gas for frontier exploration activities and management expenses before paying only 40 per cent into the Federation Account.

He argued that the Constitution requires that all revenue realised from crude oil and gas production be paid in full into the Federation Account before statutory distributions, including the 13 per cent derivation fund due to oil-producing states, are calculated.

“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 said.

The senior lawyer maintained that the current implementation of the Petroleum Industry Act has significantly reduced revenues available for distribution under Nigeria’s constitutional revenue allocation framework.

During the hearing, counsel representing the Attorney General of the Federation requested additional time to enable all parties pursue an amicable resolution through an out-of-court settlement.

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

The outcome of the suit is expected to be closely watched by investors, policymakers, state governments, and stakeholders in Nigeria’s oil and gas industry, as it could reshape the interpretation of the Petroleum Industry Act and influence future revenue allocation from the nation’s petroleum resources.