The Federal Government, states and local governments could receive an estimated additional N14.57tn in revenue following a new Executive Order signed by Bola Tinubu, directing that key oil and gas revenues be paid directly into the Federation Account.
The directive mandates that royalty oil, tax oil, profit oil, profit gas and other revenues from production sharing, profit sharing and risk service contracts be remitted straight to the Federation Account. The projection is based on an analysis of 2025 revenue inflows submitted to the Federation Account Allocation Committee.
According to the figures, the Nigerian National Petroleum Company Limited is expected to forgo about N906.91bn previously retained as management fees and frontier exploration deductions. Oil and gas royalties amounting to N7.55tn, alongside N611.42bn in gas flaring penalties collected by the Nigerian Upstream Petroleum Regulatory Commission, will now be paid directly into the Federation Account.
In addition, Petroleum Profits Tax and Hydrocarbon Tax, which generated N4.905tn in 2025 and were collected by the Nigeria Revenue Service, will also be channelled straight to the Federation Account. The Midstream and Downstream Gas Infrastructure Fund, which recorded N596.61bn in the same year, is equally affected. Altogether, the revenue streams involved total approximately N14.57tn.
The Executive Order, which took effect on February 13, 2026, also abolished the 30 per cent Frontier Exploration Fund created under the Petroleum Industry Act and stopped the 30 per cent management fee previously retained by NNPC on profit oil and profit gas.
President Tinubu said the move was necessary to curb excessive deductions and structural distortions in the oil and gas sector that have weakened remittances to the Federation Account. He stressed that revenues meant for federal, state and local governments must no longer be trapped in layers of charges and retention mechanisms.
Under the PIA framework implemented in 2021, only 40 per cent of proceeds from Production Sharing Contracts went to the Federation Account, while 60 per cent was retained by NNPC — split equally between frontier exploration and management fees. The new order ends that arrangement.
The Frontier Exploration Fund was designed to finance hydrocarbon exploration in high-risk basins such as the Chad Basin, Sokoto Basin, Bida Basin, Benue Trough and parts of the Dahomey Basin, aimed at expanding Nigeria’s reserves beyond the Niger Delta.
With the new directive, all operators under Production Sharing Contracts are now required to remit government entitlements directly into the Federation Account. Gas flare penalties will also be paid straight into the account instead of the Midstream and Downstream Gas Infrastructure Fund, and spending from the fund must now comply strictly with public procurement laws.
Tinubu emphasised that oil and gas revenues must prioritise national development, noting that the reform aligns with his administration’s fiscal discipline agenda. He also announced plans to review aspects of the Petroleum Industry Act to address structural and fiscal concerns.
Reactions to the policy have been mixed.
Professor Wumi Iledare, Chair of the Oil, Gas and Energy Policy Forum, described the order as a significant fiscal intervention aimed at strengthening transparency and discipline. However, he cautioned that changes affecting statutory frameworks under the PIA may require legislative amendments to ensure constitutional compliance and investor confidence.
On the other hand, the Capital Market Academics of Nigeria, led by Prof Uche Uwaleke, praised the move as a bold reform that corrects fiscal imbalances and promotes equitable revenue distribution among the three tiers of government.
If fully implemented, the policy is expected to substantially increase allocations to states and local governments, reduce budget deficits and improve funding for infrastructure and social services. Observers say the directive could mark a new phase of fiscal transparency and accountability in Nigeria’s oil and gas sector.
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