Tinubu’s Executive Order May Raise FG, States, LG Allocations by N15tn
The Federal Government, states and local government councils may receive additional revenue allocations of about N14.57tn following a new executive order signed by President Bola Tinubu directing that key oil and gas revenues be paid directly into the Federation Account.
The directive, signed by Bola Tinubu, mandates that royalty oil, tax oil, profit oil, profit gas and other revenues due under production sharing, profit sharing and risk service contracts be remitted straight into the Federation Account, rather than being retained by agencies and special funds.
An analysis of 2025 revenue inflows submitted to the Federation Account Allocation Committee (FAAC) shows that cumulative remittances from affected streams could amount to about N14.57tn, significantly boosting allocations to the three tiers of government
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Under the new arrangement, the Nigerian National Petroleum Company Limited is projected to forgo about N906.91bn in management fees and Frontier Exploration Fund deductions. Each of the two components accounted for N453.455bn in 2025.
Similarly, oil and gas royalties totalling N7.55tn and gas flaring penalties of N611.42bn collected by the Nigerian Upstream Petroleum Regulatory Commission will now be paid directly into the Federation Account.
Our correspondent in Abuja reports that,the Nigeria Revenue Service will also lose the authority to collect Petroleum Profits Tax and Hydrocarbon Tax, which generated N4.905tn in 2025, while the Midstream and Downstream Gas Infrastructure Fund recorded N596.61bn within the same period. Altogether, the affected revenue streams amount to roughly N14.57tn.
The executive order, which took effect from February 13, 2026, also scrapped the statutory 30 per cent Frontier Exploration Fund established under the Petroleum Industry Act and stopped the 30 per cent management fee on profit oil and profit gas retained by NNPC.
Since the implementation of the Petroleum Industry Act in 2021, only 40 per cent of proceeds from Production Sharing Contracts were remitted to the Federation Account, while 60 per cent was retained by NNPC, split equally between frontier exploration and management fees.
Frontier exploration funding was designed to finance hydrocarbon activities in high-risk basins such as the Chad, Sokoto and Bida basins, as well as the Benue Trough and parts of the Dahomey Basin, in a bid to expand Nigeria’s reserve base and reduce reliance on the Niger Delta region.
However, monthly deductions into the fund in 2025 showed significant volatility. For instance, N61.49bn was allocated in March from profits of N204.96bn, while June recorded the lowest deduction of N6.83bn after profits dropped sharply to N22.77bn. The highest remittance occurred in August, when N78.94bn was transferred following a surge in profit to N263.13bn.
The same 30 per cent rule applied to NNPC’s management fees, with monthly inflows mirroring frontier exploration deductions throughout the year, reflecting the direct link between Production Sharing Contract profits and agency earnings.
The directive also suspended payments of gas flare penalties into the Midstream and Downstream Gas Infrastructure Fund and ordered that all proceeds be remitted to the Federation Account. It further mandated that any expenditure from the fund must comply strictly with existing public procurement laws.
Explaining the rationale for the reform, Tinubu said excessive deductions, overlapping funds and structural distortions had weakened remittances meant for the federation.
He stated, “For too long, excessive deductions, overlapping funds, and structural distortions in the oil and gas sector have weakened remittances to the Federation Account. When revenues meant for federal, state, and local governments are trapped in layers of charges and retention mechanisms, development suffers. That must end.”
The President added that oil and gas revenues must serve Nigerians first and disclosed that a comprehensive review of the Petroleum Industry Act would be undertaken to address fiscal anomalies. He also approved the constitution of an implementation committee to oversee the execution of the order.
The anticipated increase in remittances is expected to significantly boost sub-national earnings, potentially easing budget deficits and improving funding for infrastructure, healthcare and education across the country.
Over the years, both the Nigeria Extractive Industries Transparency Initiative and the National Assembly have raised concerns over revenue leakages and opaque deductions in the oil and gas sector. With the latest directive, stakeholders say Nigeria may be entering a new phase of fiscal discipline and transparency in its most critical revenue-generating industry.
@punch Newspaper