The Federal, state and local governments may receive additional allocations of about N14.57tn following a new Executive Order signed by President Bola Tinubu directing that royalty oil, tax oil, profit oil, profit gas and other revenues due to the Federation under production sharing, profit sharing and risk service contracts be paid directly into the Federation Account.
An analysis of 2025 revenue inflows, based on monthly earnings submitted to the Federation Account Allocation Committee and obtained in Abuja, indicates that several major oil and gas revenue streams will now bypass intermediary deductions and flow straight to the Federation Account.
From 2025 remittance estimates, the Nigerian National Petroleum Company is projected to forgo about N906.91bn previously retained as management fees and Frontier Exploration Fund deductions. In the same period, oil and gas royalties totalling N7.55tn and gas flaring penalties of N611.42bn collected by the Nigerian Upstream Petroleum Regulatory Commission are also expected to be remitted directly to the Federation Account.
In addition, revenues from Petroleum Profits Tax and Hydrocarbon Tax amounting to N4.905tn in 2025, previously administered by the Nigeria Revenue Service, will now be channelled straight into the Federation pool. The Midstream and Downstream Gas Infrastructure Fund recorded N596.61bn in 2025, bringing the total value of affected revenue streams to about N14.57tn.
The President’s order, which took effect from February 13, 2026, also scrapped the 30 per cent Frontier Exploration Fund established under the Petroleum Industry Act and ended the 30 per cent management fee on profit oil and profit gas retained by the national oil company. The directive is aimed at strengthening remittances, blocking leakages and safeguarding oil and gas revenues due to the Federation.
Invoking Section 5 of the 1999 Constitution (as amended), and relying on Section 44(3), which vests ownership and control of minerals, mineral oils and natural gas in the Government of the Federation, the President said the reform is intended to correct structural distortions that have weakened inflows into the Federation Account.
Implementation of the directive reportedly commenced in January, with its effects expected to reflect in upcoming FAAC allocations.
Since the Petroleum Industry Act came into force in 2021, only 40 per cent of proceeds from Production Sharing Contracts had been paid into the Federation Account, while 60 per cent was retained by the NNPC—split evenly between the Frontier Exploration Fund and management fees.
Under the new arrangement, the NNPC will no longer collect or manage the statutory 30 per cent Frontier Exploration Fund. The fund had been designed to finance hydrocarbon exploration in frontier basins outside the traditional Niger Delta producing region, including the Chad, Sokoto and Bida basins, the Benue Trough and parts of the Dahomey Basin. Exploration activities in these areas involve seismic surveys, exploratory drilling and geological studies aimed at expanding reserves and enhancing long-term energy security.
The order further directs all operators under Production Sharing Contracts to remit royalty oil, tax oil, profit oil, profit gas and other government interests directly into the Federation Account. Gas flare penalties, previously paid into the Midstream and Downstream Gas Infrastructure Fund, are now to be remitted straight to the Federation Account, while any expenditure from the gas infrastructure fund must comply strictly with public procurement laws.
President Tinubu stated that excessive deductions, overlapping funds and structural distortions in the oil and gas sector had undermined remittances. He stressed that revenues meant for the three tiers of government must no longer be trapped in layers of charges and retention mechanisms.
He added that oil and gas revenues must serve Nigerians first, noting that ongoing sector reforms are designed to promote fairness and fiscal responsibility. The President also disclosed that a comprehensive review of the Petroleum Industry Act would be undertaken to address structural and fiscal weaknesses, alongside the inauguration of an implementation committee to oversee the directive.
A review of 2025 FAAC data suggests the reallocation could significantly reshape institutional revenue flows. While the NNPC may lose about N906.91bn in management fees and frontier deductions—each accounting for N453.46bn in 2025—other agencies could face even larger revenue adjustments.
For instance, royalties and gas flare penalties collected by the Nigerian Upstream Petroleum Regulatory Commission totalled over N8tn in 2025, while Petroleum Profits Tax and Hydrocarbon Tax generated N4.905tn. The Midstream and Downstream Gas Infrastructure Fund recorded N596.61bn during the year.
Cumulatively, these streams amount to roughly N14.72tn, though actual inflows may fluctuate depending on crude oil production levels and exploration activity.
The anticipated increase in direct remittances is expected to boost allocations to states and local governments, potentially easing budget deficits and improving funding for infrastructure and social services.
Over the years, concerns have been raised by oversight bodies and lawmakers about revenue leakages, delayed remittances and opaque deductions within the oil and gas sector. With the new directive, the government says it is ushering in a new phase of fiscal discipline and transparency in Nigeria’s most critical revenue-generating industry.
Reactions from stakeholders have been mixed. While some experts welcomed the push for improved transparency and fiscal integrity, others cautioned that elements of the Executive Order may intersect with statutory provisions under the Petroleum Industry Act and could require legislative alignment to ensure contractual stability and investor confidence.
Supporters of the reform, however, described it as a bold move to correct longstanding fiscal imbalances and strengthen revenue equity across the federation, while urging robust oversight to ensure transparent implementation.
