President Bola Ahmed Tinubu has signed a far-reaching executive order mandating that all revenues accruing from Nigeria’s oil and gas operations be paid directly into the Federation Account, in what officials describe as a decisive step toward strengthening fiscal transparency, eliminating revenue leakages, and reinforcing constitutional compliance in public finance management.
The directive covers the full spectrum of petroleum-derived income, including crude oil sales proceeds, gas revenues, petroleum profit tax, royalties, signature bonuses, production sharing contract (PSC) earnings, license fees, penalties, and other statutory payments collected across the upstream, midstream, and downstream segments of the industry. Under the new order, no agency or state-owned enterprise is permitted to retain, deduct, or utilize oil and gas revenues outside the framework of the Federation Account without express constitutional or legislative backing.
Section 162(1) of the 1999 Constitution of the Federal Republic of Nigeria (as amended) stipulates that all revenues collected by the Government of the Federation must be paid into the Federation Account, except those specifically exempted by law. Funds in the account are subsequently distributed monthly among the federal, state, and local governments through the Federation Account Allocation Committee (FAAC).
Over the years, controversies have arisen over remittance practices within the petroleum sector. State governors have repeatedly raised concerns about under-remittances, discretionary cost recoveries, subsidy-related deductions, and operational expenditures that reduce net transfers into the Federation Account. Audit reports and legislative reviews have also pointed to inconsistencies in reporting frameworks and reconciliation processes.
The executive order is expected to directly affect key institutions within Nigeria’s petroleum governance architecture, including the Nigerian National Petroleum Company Limited (NNPCL), which transitioned into a limited liability company under the Petroleum Industry Act (PIA), as well as regulatory bodies such as the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
While NNPCL now operates as a commercial entity, it remains wholly government-owned and plays a central role in crude oil marketing, joint venture operations, and production sharing arrangements. The new directive is likely to redefine the operational boundaries between commercial retention, statutory obligations, and remittance responsibilities. Fiscal experts note that the order may require strengthened reconciliation mechanisms between production data, export volumes, lifting schedules, and payment flows. Digital tracking systems, improved audit trails, and enhanced coordination between the Ministry of Finance, the Central Bank of Nigeria, and petroleum regulators are expected to form part of the enforcement framework.
The move aligns with President Tinubu’s broader fiscal reform strategy aimed at expanding government revenue without increasing debt exposure. Since assuming office, the administration has prioritized subsidy removal, tax reform initiatives, and revenue harmonization policies intended to stabilize Nigeria’s macroeconomic environment.
Oil and gas remain the backbone of Nigeria’s external earnings, accounting for the majority of foreign exchange inflows and a significant portion of government revenue. However, volatility in global oil prices, production shortfalls due to pipeline vandalism and theft, and operational inefficiencies have constrained fiscal performance in recent years. By mandating direct remittance into the Federation Account, the presidency signals an intention to restore credibility to revenue accounting practices and ensure that distributable funds accurately reflect actual sector performance.
For state and local governments, the executive order could translate into improved predictability in monthly FAAC allocations, provided implementation is rigorous. Many states remain heavily dependent on federal transfers to fund recurrent expenditures, including salaries, pensions, and infrastructure projects. Enhanced transparency in oil and gas revenue remittance could therefore ease fiscal pressures at the subnational level. Governors have historically argued that clearer revenue reporting would enable more reliable budgeting and planning cycles.
Market analysts suggest the directive may be interpreted positively by international investors and credit rating agencies, particularly if it strengthens governance within the petroleum sector. Transparent revenue management is often viewed as a critical indicator of institutional stability in resource-dependent economies. However, implementation will be closely monitored, especially regarding transitional arrangements, treatment of legacy financial obligations, cost recovery structures under production sharing contracts, and the commercial autonomy of NNPCL under the PIA framework.
Policy observers emphasize that the success of the executive order will depend less on its announcement and more on enforcement discipline. Clear guidelines, periodic audits, public disclosure of remittance data, and sanctions for non-compliance will be necessary to achieve durable reform.
