Tinubu’s executive order could redirect ₦14.7tn to Federation Account
The federal, state and local governments may receive additional allocations of about ₦14.7tn following an executive order signed by President Bola Tinubu directing that royalty oil, tax oil, profit oil, profit gas and other revenues due to the federation be paid directly into the Federation Account.
The directive covers proceeds from production sharing, profit sharing and risk service contracts, and is expected to significantly reshape revenue flows within the oil and gas sector.
An analysis of 2025 revenue inflows, based on monthly earnings submitted to the Federation Account Allocation Committee (FAAC), indicates that the reallocation could affect multiple institutions and funding streams.
Under the new order, the Nigerian National Petroleum Company Limited (NNPCL) is projected to forgo about ₦906.91bn in management fees and frontier exploration fund deductions recorded in 2025. Each accounted for ₦453.455bn during the year.
Oil and gas royalties totalling ₦7.55tn and gas flaring penalties of ₦611.42bn, previously overseen by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), will now be remitted directly to the Federation Account.
The Nigeria Revenue Service (NRS) will also cease collecting petroleum profits tax and hydrocarbon tax, which generated ₦4.905tn in 2025. In addition, the Midstream and Downstream Gas Infrastructure Fund (MDGIF), which recorded ₦596.61bn in the same period, will be subject to new remittance and procurement rules.
Cumulatively, the affected revenue streams amount to approximately ₦14.72tn, although actual inflows will depend on crude production levels and price volatility.
The order, which took effect from 13 February 2026, also scrapped the 30% frontier exploration fund established under the Petroleum Industry Act and ended the 30% management fee on profit oil and profit gas retained by NNPCL.
Since the implementation of the Petroleum Industry Act in 2021, the Federation Account had received 40% of proceeds from production sharing contracts, while the remaining 60% was retained by NNPCL, split equally between frontier exploration and management fees.
Frontier exploration funding was designed to support hydrocarbon exploration in basins outside the Niger Delta, including the Chad, Sokoto and Bida basins, the Benue Trough and parts of the Dahomey basin. These projects typically involve seismic acquisition, exploratory drilling and geological studies aimed at expanding reserves and reducing regional concentration of oil production.
Under the new directive, NNPCL will no longer manage the frontier exploration fund and will operate strictly as a commercial enterprise in line with its limited liability status.
The order further mandates that all operators under production sharing contracts remit royalty oil, tax oil, profit oil and profit gas directly into the Federation Account. Gas flare penalties will also be paid directly into the account, while expenditure from the MDGIF must comply with existing public procurement laws.
Tinubu said excessive deductions and overlapping funds had weakened remittances to the Federation Account.
“For too long, excessive deductions, overlapping funds and structural distortions in the oil and gas sector have weakened remittances to the Federation Account,” he said in a statement. “Oil and gas revenues must serve the Nigerian people first, and this reform is about fairness and fiscal responsibility.”
He added that a review of the Petroleum Industry Act would be undertaken to address structural and fiscal anomalies, and announced the approval of an implementation committee to oversee the directive.
Data from 2025 show marked volatility in production sharing contract profits and related deductions. Frontier exploration deductions ranged from ₦6.83bn in June, when profits fell sharply, to ₦82.61bn in September amid higher earnings. The same 30% rule applied to NNPCL’s management fees, which mirrored frontier allocations month by month.
The MDGIF also recorded fluctuating inflows, with monthly collections ranging from ₦29.19bn in April to ₦66.32bn in September and October.
Commenting on the order, Professor Wumi Iledare, chair of the Oil, Gas and Energy Policy Forum, described the directive as a significant fiscal intervention aimed at strengthening transparency and curbing discretionary retention of revenues.
While acknowledging the government’s objectives, he cautioned that aspects of the order may intersect with statutory provisions of the Petroleum Industry Act and could require legislative amendments to ensure constitutional alignment and contractual certainty.
“Reforms that improve transparency and fiscal integrity are welcome,” he said. “But sustainable reform must align with constitutional processes, statutory frameworks and investor predictability.”
Meanwhile, the Capital Market Academics of Nigeria backed the move, describing it as a bold reform to correct fiscal imbalances under the existing framework.
Its president, Prof Uche Uwaleke, said the policy would strengthen revenue transparency and enhance allocations to all tiers of government, while urging safeguards to ensure effective implementation.
Analysts say the anticipated increase in remittances could boost subnational finances, reduce budget deficits and improve funding for infrastructure and social services, though its long-term impact will depend on production levels, investor confidence and legislative adjustments.