Nigerian President Bola Tinubu has signed an executive order directing that all oil and gas revenues owed to the government be paid directly into the federation account, the presidency said on Wednesday, in a sweeping reform aimed at strengthening public finances.
Under existing provisions, the state-owned Nigerian National Petroleum Corporation (NNPC) retains 30 percent of oil and gas profits for frontier exploration in inland basins. According to the presidency, those funds will now be remitted in full to the federation account and subsequently appropriated through the national budget.
NNPC also keeps 30% of oil and gas sales as operational costs and receives 30% of proceeds from Production Sharing Contracts (PSCs). Under the new directive, all such revenues will flow directly to the federation account, while the company will instead receive appropriated management fees.
The reforms extend beyond NNPC. Royalty payments, petroleum profit taxes and other statutory revenues previously collected and retained by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will now be paid directly into the federation account.
Similarly, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) will remit its revenues in full, with its cost of collection to be funded through budgetary appropriation.
The presidency said deductions enabled under the current law had significantly reduced net oil inflows, contributing to fiscal strain across federal, state and local governments that depend heavily on allocations from the federation account.
Nigeria, Africa’s largest oil producer, relies on crude exports for the bulk of its foreign exchange earnings and a substantial share of government revenue. However, oil output has been volatile in recent years due to pipeline vandalism, crude theft and underinvestment, exacerbating pressure on public finances.
Tinubu’s office said the new order seeks to improve transparency and ensure that all oil-related revenues are centrally accounted for before distribution under Nigeria’s revenue-sharing formula. Funds in the federation account are shared among the federal government, 36 states and 774 local government areas.
Analysts say the move could boost government cash flow in the short term and improve fiscal visibility, though its effectiveness will depend on enforcement and broader reforms in the oil sector.
Tinubu also ordered a review of the relevant law and established an implementation committee to oversee the changes, signaling the administration’s intent to tighten revenue administration in the energy sector.
Since taking office in 2023, Tinubu has introduced a series of economic reforms, including the removal of a long-standing fuel subsidy and foreign exchange liberalisation, measures aimed at stabilising public finances and attracting investment but which have also triggered inflationary pressures.
The latest directive forms part of broader efforts to shore up revenue at a time when Nigeria faces rising debt servicing costs and persistent budget deficits. By centralising oil and gas revenues, the government hopes to strengthen fiscal discipline and ensure more predictable transfers to subnational governments.
Oil revenues have historically been subject to complex deductions and retention mechanisms, often criticised for reducing transparency and limiting the funds available for public spending. The presidency said the new framework would align remittances more closely with constitutional provisions governing the federation account.
Further details on the implementation timeline were not immediately disclosed.
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Nigeria’s public finances are heavily dependent on oil and gas exports, which account for the majority of foreign exchange earnings and a significant share of government revenue. Funds collected from crude sales, royalties and petroleum taxes are paid into the federation account a central pool established under the constitution — and shared among the federal government, 36 states and 774 local governments.
For decades, the structure of Nigeria’s oil sector has been criticised for opacity, complex deductions and weak remittance practices. Before the latest directive, the state-owned Nigerian National Petroleum Corporation (NNPC) retained portions of oil revenues under various legal provisions. These included 30% of oil and gas profits earmarked for frontier basin exploration, 30 percent of oil and gas sales for operational costs, and 30% of proceeds from Production Sharing Contracts (PSCs).
Regulatory bodies such as the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) also collected and retained certain statutory revenues, including royalties and fees, to fund their operations.
These arrangements were formalised under the Petroleum Industry Act (PIA) of 2021, a landmark reform law designed to modernise Nigeria’s oil and gas framework, attract investment and clarify governance structures. While the PIA restructured the former NNPC into a commercially oriented entity, critics have argued that extensive retention provisions reduced the net inflows to the federation account.
The issue has been particularly sensitive because state governments rely heavily on monthly allocations from the federation account to fund salaries, infrastructure and social services. Any decline in remittances directly affects subnational finances, often leading to borrowing or delayed payments.
Nigeria’s fiscal challenges have intensified in recent years. Crude production has fluctuated due to pipeline vandalism, oil theft and underinvestment, while global price volatility has added uncertainty to revenue projections. At the same time, debt servicing costs have risen sharply, consuming a large portion of federal revenues.
Since taking office in 2023, President Bola Tinubu has launched sweeping economic reforms aimed at stabilising the economy. These include removing a costly fuel subsidy regime and liberalising the foreign exchange market — policies that improved fiscal metrics but also fuelled inflation and public discontent.
The new directive to channel all oil and gas revenues directly into the federation account is part of a broader push to enhance transparency, improve cash flow and reduce discretionary deductions within the sector. By requiring that operational and regulatory costs be funded through formal budget appropriations rather than direct retention, the administration aims to strengthen oversight and align remittances with constitutional revenue-sharing provisions.
Analysts say the success of the reform will depend on implementation, political will and whether it is accompanied by improvements in oil production, security and broader fiscal management. Nigeria remains Africa’s largest oil producer and most populous country, making the effectiveness of its revenue reforms closely watched by investors and regional peers alike.
