Nigeria’s Oil Revenue Reform: Tinubu’s Executive Order Set to Boost Federal, State and Local Government Finances
RMAFC Says Executive Order Enhances Oil Revenue Transparency and Allocations
President Bola Tinubu’s Executive Order on oil and gas revenue remittance is poised to increase the funds available to the Federal Government, state administrations and local councils by directing all petroleum revenues straight into the Federation Account, eliminating earlier layered deductions that constrained inflows to government coffers, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has said.
Direct Remittance of Oil and Gas Revenues
In a statement issued from Abuja, the Chairman of the RMAFC, Dr Mohammed Shehu, welcomed the Executive Order, noting it will enhance transparency in revenue flows and strengthen fiscal federalism by ensuring revenues due to all three tiers of government are fully and directly remitted into the Federation Account without unnecessary deductions.
Under the reform, revenues previously subjected to multiple charges and retention mechanisms including management fees and frontier exploration allocations will now be paid directly into the Federation Account, where they can be equitably distributed through constitutional allocation formulas.
According to analysts, this could unlock an additional ₦14.57 trillion in annual allocations for the Federal Government, states and local governments based on 2025 revenue inflows.
Addressing Structural Deductions
Prior to the Executive Order, several provisions of the Petroleum Industry Act (PIA) 2021 allowed for deductions that effectively reduced net remittances into the Federation Account. These included:
A 30 % management fee retained by the Nigerian National Petroleum Company Ltd (NNPC),
A 30 % Frontier Exploration Fund allocation, and
Additional cut-outs for statutory and regulatory funding streams.
The new directive effectively abolishes these mechanisms by insisting that royalty oil, tax oil, profit oil, profit gas and other petroleum entitlements be paid directly into the Federation Account, closing revenue leakages and eliminating duplicative deductions.
Fiscal Federalism and Transparency
Dr Shehu characterised the reform as “bold, constitutionally grounded and fiscally transformative”, reinforcing the constitutional principle that ownership and control of Nigeria’s mineral oils and natural gas rest with the Federation for the benefit of all Nigerians.
By standardising remittance channels and consolidating previously fragmented revenue streams, the Executive Order is expected to:
Improve predictability and stability of cash flows to the Federation Account,
Strengthen oversight and monitoring of revenue accruals, and
Support broader public financial management reforms in line with global fiscal best practices.
For state and local government budgets which depend heavily on federally shared revenues more predictable and larger inflows have the potential to support essential public services, infrastructure development and economic stabilisation efforts.
Broader Policy Context and Reactions
The reforms come amid ongoing efforts by the Federal Government to broaden the revenue base, improve fiscal discipline and reduce dependence on oil and gas earnings subject to inefficient administration. Officials expect the reform to strengthen allocations to all tiers of government, including derivation payments to oil-producing states.
Notwithstanding broad institutional support, some industry stakeholders have expressed caution. For example, PENGASSAN, the Petroleum and Natural Gas Senior Staff Association of Nigeria, has criticised the Executive Order, arguing that it may undermine investor confidence and contravene existing statutory frameworks established under the PIA.
Implications for Public Finance
If the projected increase in allocations materialises, the reform could bring substantive additional revenues into the nation’s fiscal system. However, experts underscore that implementation and accompanying legal clarity will be essential to avoid operational disruptions in the oil and gas sector while safeguarding investor confidence and long-term production incentives.
The directive also signals the administration’s resolve to tighten revenue mobilisation frameworks, improve accountability, and bolster the funds available for national priorities including security, infrastructure, healthcare and economic stabilization.
President Tinubu’s Executive Order on direct oil and gas revenue remittance represents a significant fiscal policy shift in Nigeria’s public finance architecture. By channeling previously fragmented and partially retained revenues directly into the Federation Account, the reform aims to enhance transparency, strengthen fiscal federalism, and increase the financial resources available to federal, state and local governments. Its success will depend on effective implementation, clear legal grounding and institutional coordination to ensure sustained revenue inflows and balanced economic growth.
