Bola Tinubu’s recent Executive Order mandating the direct remittance of key oil and gas revenues into the Federation Account could unlock as much as N14.7tn–N15tn annually for distribution to the federal, state and local governments, based on 2025 revenue data.
An analysis of remittances to the Federation Account Allocation Committee (FAAC) shows that the new directive fundamentally alters how royalty oil, tax oil, profit oil, profit gas, petroleum taxes, gas flare penalties and other upstream earnings are handled under the post-Petroleum Industry Act (PIA) framework.
What Changes Under the Executive Order?
The President’s order directs that all revenues due to the Federation under Production Sharing Contracts (PSCs), profit-sharing and risk service contracts be paid directly into the Federation Account.
Specifically, the directive:
Ends the retention of 30% Frontier Exploration Fund deductions under the PIA.
Scraps the 30% management fee on profit oil and profit gas previously retained by the Nigerian National Petroleum Company Limited.
Mandates direct remittance of royalty oil, tax oil, profit oil and profit gas to the Federation Account.
Suspends payment of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund (MDGIF), redirecting them to the Federation Account.
Subjects MDGIF expenditures to public procurement regulations.
The order, which took effect February 13, 2026, was issued pursuant to Sections 5 and 44(3) of the Constitution, which vest control of mineral resources in the Government of the Federation.
The N14.7tn Revenue Impact
Based on 2025 FAAC data, the revenue streams now affected include:
Oil and gas royalties: N7.55tn (collected by the Nigerian Upstream Petroleum Regulatory Commission)
Gas flare penalties: N611.42bn
Petroleum Profits Tax and Hydrocarbon Tax: N4.905tn (previously collected by the Nigeria Revenue Service)
Midstream and Downstream Gas Infrastructure Fund (MDGIF): N596.61bn
NNPC management fees and Frontier Exploration deductions: N906.91bn
Cumulatively, these amount to about N14.72tn, though actual inflows will depend on crude oil output, global prices and PSC profitability.
If fully realised, this could significantly raise FAAC disbursements to states and local governments, easing fiscal deficits and improving funding for infrastructure, healthcare, education and security.
End of the 60% Retention Structure
Under the PIA regime introduced in 2021, only 40% of PSC proceeds were paid into the Federation Account. The remaining 60% was retained by the national oil company:
30% for the Frontier Exploration Fund
30% as management fee on profit oil and profit gas
The Executive Order dismantles this structure.
In 2025 alone, each of the 30% allocations yielded N453.455bn, although the Frontier Exploration Fund fell short of its N710.52bn budget by N257.07bn, highlighting volatility in PSC earnings.
Monthly deductions mirrored oil price and production swings, ranging from a low of N6.83bn in June to a peak of over N82bn in September.
Implications for Key Institutions
The policy is expected to reshape the financial architecture of the oil and gas sector:
Nigerian National Petroleum Company Limited (NNPCL) stands to lose about N906.91bn annually in retained earnings from management fees and frontier exploration deductions.
Nigerian Upstream Petroleum Regulatory Commission (NUPRC) may forgo cost-of-collection revenue tied to royalty collections and gas flare penalties totaling over N8tn.
The Midstream and Downstream Gas Infrastructure Fund loses its independent inflow of N596.61bn.
The Nigeria Revenue Service relinquishes direct collection authority over N4.905tn in petroleum taxes.
However, proponents argue that while sector agencies may face operational adjustments, the Federation Account — and by extension subnational governments — will be the principal beneficiary.
Frontier Exploration Fund: Strategic but Controversial
The Frontier Exploration Fund was created under the PIA to finance hydrocarbon exploration in high-risk basins outside the traditional Niger Delta, including:
The Chad Basin
Sokoto Basin
Bida Basin
Benue Trough
Dahomey Basin
These projects were intended to expand Nigeria’s reserves base and diversify production geography. Critics, however, have long questioned the transparency and fiscal justification for retaining such a significant share of PSC earnings.
The President argued that “excessive deductions, overlapping funds and structural distortions” have weakened remittances and slowed development.
In a public statement, Tinubu said oil and gas revenues must “serve the Nigerian people first,” adding that the era of duplicative deductions is over.
Expert Reactions: Reform vs Legal Certainty
Chair of the Oil, Gas and Energy Policy Forum, Professor Wumi Iledare, described the directive as a “significant fiscal intervention” aimed at enhancing transparency and discipline.
However, he cautioned that elements of the order intersect with statutory provisions of the PIA 2021 and may require legislative amendments to avoid constitutional conflicts and maintain investor confidence.
He stressed the need to distinguish between:
Contractual entitlements under PSCs
Corporate retained earnings
Statutory earmarked funds
The Capital Market Academics of Nigeria, led by Prof. Uche Uwaleke, endorsed the reform, calling it a historic correction of fiscal imbalance and a victory for revenue equity among the three tiers of government.
A New Fiscal Phase?
If effectively implemented, the reform could:
Strengthen the Federation Account
Improve budgetary stability
Reduce revenue leakages flagged by the Nigeria Extractive Industries Transparency Initiative and the National Assembly
Enhance fiscal transparency in Africa’s largest oil producer
The administration has also announced a review of the Petroleum Industry Act to address structural and fiscal anomalies, alongside an implementation committee to oversee compliance.
With FAAC allocations expected to reflect the changes imminently, Nigeria may be entering a new phase of tighter fiscal control in its most critical revenue-generating sector — one that could significantly reshape intergovernmental revenue sharing and the future governance of oil wealth.
