President Bola Tinubu’s latest Executive Order on oil and gas revenue remittances could significantly reshape Nigeria’s fiscal landscape, with projections indicating that about N14.7tn may now flow directly into the Federation Account for distribution to the federal, state and local governments.
The directive mandates that royalty oil, tax oil, profit oil, profit gas and all other revenues due to the Federation under production sharing, profit sharing and risk service contracts be paid straight into the Federation Account. The order, which took effect from February 13, 2026, also eliminates the 30 per cent Frontier Exploration Fund and halts the 30 per cent management fee previously retained by the Nigerian National Petroleum Company Limited (NNPC).
An analysis of revenue inflows submitted to the Federation Account Allocation Committee (FAAC) for 2025 shows that the affected revenue streams total approximately N14.72tn, although actual figures may fluctuate depending on oil production levels and market conditions.
Under the Petroleum Industry Act (PIA) 2021 framework, only 40 per cent of Production Sharing Contract (PSC) proceeds accrued to the Federation Account, while 60 per cent was retained by NNPC—split equally between the Frontier Exploration Fund and management fees. With the new directive, those deductions are discontinued, meaning the full statutory share is expected to be remitted for distribution among the three tiers of government.
In 2025 alone, deductions for the Frontier Exploration Fund and management fees amounted to N906.91bn, with each accounting for N453.46bn. The frontier fund was established to finance hydrocarbon exploration in high-risk basins outside the Niger Delta, including the Chad, Sokoto, Bida and Benue Trough regions. However, inflows into the fund fluctuated sharply throughout the year, reflecting volatility in PSC profits.
Beyond NNPC’s retained sums, the Nigerian Upstream Petroleum Regulatory Commission collected N7.55tn in oil and gas royalties in 2025, alongside N611.42bn in gas flaring penalties. These revenues are now to be remitted directly into the Federation Account.
Similarly, Petroleum Profits Tax and Hydrocarbon Tax collections totalling N4.905tn in 2025 - previously administered by the Nigeria Revenue Service - will now flow straight into the Federation pool. The Midstream and Downstream Gas Infrastructure Fund recorded N596.61bn in the same year. Under the Executive Order, gas flare penalties will no longer be paid into that fund, and all its expenditures must comply strictly with public procurement laws.
In announcing the reform, Tinubu said excessive deductions and overlapping revenue retention mechanisms had weakened remittances meant for national development.
“For too long, revenues meant for federal, state and local governments have been trapped in layers of charges and retention mechanisms,” the President stated. “Oil and gas revenues must serve the Nigerian people first.”
He invoked Section 5 of the Constitution, which empowers the President to execute laws, and anchored the directive on Section 44(3), which vests ownership and control of mineral resources in the Government of the Federation. An implementation committee has been approved to oversee execution, while a broader review of the PIA is expected.
The potential fiscal impact is significant. Increased inflows into the Federation Account could boost FAAC allocations, ease pressure on state finances, reduce borrowing needs and improve funding for infrastructure, healthcare and education.
However, reactions from experts remain mixed. Some energy analysts have welcomed the move as a step toward improved transparency and fiscal discipline. Others caution that aspects of the order may intersect with statutory provisions of the PIA and could require legislative amendments to ensure legal clarity and investor confidence.
Despite these concerns, the reform signals a decisive shift in revenue governance within Nigeria’s oil and gas sector. If implementation proceeds smoothly, the projected N15tn redirection of funds may mark one of the most consequential fiscal adjustments since the passage of the Petroleum Industry Act, with far-reaching implications for public finance across the federation.
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