- The President said the reform is designed to curb excessive deductions, improve transparency
- While the policy is expected to increase allocations to sub-national governments and reduce fiscal strain
- With the new policy, all qualifying revenues are to be paid straight into the Federation Account
President Bola Tinubu’s recent Executive Order mandating the direct payment of key oil and gas revenues into the Federation Account could significantly reshape Nigeria’s fiscal framework, with an estimated N14.57tn in additional funds potentially accruing to the federal, state, and local governments.
It was reported on Wednesday that the President signed the executive order 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, Eko Hot Blog reports
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An analysis of 2025 revenue data submitted to the Federation Account Allocation Committee shows that several major income streams will now bypass earlier retention arrangements.
These include oil and gas royalties estimated at N7.55tn, gas flare penalties of N611.42 billion, and about N4.905 trillion generated from Petroleum Profits Tax and Hydrocarbon Tax.
Additionally, management fees and frontier exploration deductions previously retained by the Nigerian National Petroleum Company Limited are affected by this directive.
The order, which took effect on February 13, 2026, effectively ends the system introduced under the Petroleum Industry Act (PIA) that allowed the national oil company to retain 60 per cent of Production Sharing Contract proceeds—split evenly between the Frontier Exploration Fund and management fees.
With the new policy, those deductions have been discontinued, and all qualifying revenues are to be paid straight into the Federation Account.
Gas flare penalties that were formerly channelled into the Midstream and Downstream Gas Infrastructure Fund will also be redirected to the central pool.
The President said the reform is designed to curb excessive deductions, improve transparency, and strengthen public finances.
While the policy is expected to increase allocations to sub-national governments and reduce fiscal strain, analysts note that certain elements may require legislative adjustments to align fully with the Petroleum Industry Act and safeguard investor confidence.
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