How Tinubu’s Executive Order reshapes oil revenue

In what presidency officials describe as “a decisive recalibration of Nigeria’s petroleum revenue framework,” President Bola Ahmed Tinubu has initiated what may become the most significant fiscal shift since the Petroleum Industry Act (PIA) came into force in 2021.

At the centre of the directive is a clear principle: all revenues accruing to the Federation must first be paid into the Federation Account before any deductions, allocations or discretionary spending mechanisms are applied. Presidency sources insist the move is not a repudiation of the PIA, but a constitutional correction.

“This is about restoring the primacy of the federation,” a senior presidency source said. “The Constitution is clear. Revenue due to the federation must go into the Federation Account. Under post-PIA implementation, significant portions of Production Sharing Contract revenues were retained before remittance. The President has now corrected that distortion.”

A structural reset of revenue flows

Since the PIA’s implementation, only 40 per cent of proceeds from Production Sharing Contracts (PSCs) were reportedly remitted into the Federation Account. The remaining 60 per cent was split evenly between the Frontier Exploration Fund (FEF) and a management fee retained by the Nigerian National Petroleum Company Limited (NNPC Ltd).

Under the new executive order, royalty oil, tax oil, profit oil, profit gas and all other government entitlements under PSCs, profit-sharing and risk service contracts are to be paid directly into the Federation Account.

Financial submissions to the Federation Account Allocation Committee (FAAC) indicate that the affected revenue streams in 2025 alone amounted to approximately N14.57 trillion.

According to a source familiar with the implementation committee, “The President’s objective is not to weaken institutions. It is to ensure that revenue architecture aligns with constitutional intent. Oil and gas wealth belongs to the federation first.”

Presidency officials argue that redirecting these inflows enhances transparency, strengthens subnational allocations and reduces structural leakages.

Constitutional anchoring

The executive order reportedly invokes Sections 5, 44(3) and 162 of the 1999 Constitution, which vest executive authority in the President, place mineral resources under federal control and mandate that all revenues accruing to the federation be paid into the Federation Account.

“For too long, overlapping funds, layered deductions and structural retention mechanisms weakened remittances,” one senior official said. “When revenues are trapped before reaching the Federation Account, the three tiers of government lose visibility and control.”

Government legal analysts maintain that while management fees or exploration funding may be legitimate policy tools, such deductions must occur after full remittance—not before.

Ending the frontier exploration retention model

A key feature of the order is the scrapping of the 30 per cent Frontier Exploration Fund retention model created under the PIA to finance hydrocarbon exploration in frontier basins including the Chad, Sokoto and Bida basins, as well as parts of the Benue Trough and Dahomey Basin.

While acknowledging the strategic importance of exploration, presidency sources argue that automatic retention undermined constitutional revenue flows.

“No one is against exploration,” an Aso Rock adviser said. “But exploration cannot come at the expense of constitutional revenue flows. Funding models must be transparent, appropriated and accountable.” Under the revised framework, exploration funding is expected to undergo review, potentially through annual budgetary appropriations.

NNPC’s commercial mandate

The order also halts the 30 per cent management fee on profit oil and profit gas retained by NNPC Ltd. FAAC submissions show that in 2025, both the management fee and Frontier Exploration Fund deductions each accounted for N453.455 billion, bringing total retention under the two heads to N906.91 billion.

Presidency officials contend that the arrangement created a structural imbalance, particularly as NNPC also retains 20 per cent of profits under its commercial structure. “The President has made it clear,” a senior source noted. “NNPC must operate strictly as a commercial enterprise. It cannot simultaneously function as operator, regulator, revenue-retainer and dividend-declarer without guardrails.” Insiders say the reform reinforces NNPC’s transition into a purely commercial entity accountable to shareholders, without quasi-fiscal discretion over Federation revenues.

Direct remittance and stronger oversight

Another significant shift mandates contractors and operators under PSCs to remit royalty oil, tax oil and profit oil directly into the Federation Account, rather than routing lifting and sale arrangements through NNPC channels.

“This is about traceability,” an official said. “Every barrel due to the Federation must be visible. Every dollar must be accountable.” The directive further requires gas flare penalties collected by the Nigerian Upstream Petroleum Regulatory Commission to be paid into the Federation Account. Expenditures from the Midstream and Downstream Gas Infrastructure Fund must also comply with public procurement laws.

Impact on subnational governments

State and local governments are expected to benefit from improved remittance efficiency and greater predictability in FAAC allocations.

“With stronger remittance discipline, allocations to states and local governments will improve predictability,” a financial official familiar with FAAC processes said. “This reform supports education, healthcare, infrastructure and debt sustainability.” Presidency insiders describe the move as part of a broader fiscal consolidation strategy. Since 2021, dividend substitution replaced direct revenue flows, but actual remittances reportedly fell short of projections.

“The Federation cannot exchange guaranteed oil revenue for uncertain dividend promises,” an Aso Rock adviser said. “The President has ended that risk.” Though politically sensitive, presidency sources argue that fiscal urgency required decisive action. As FAAC prepares upcoming allocations, attention will focus on measurable gains. For the Presidency, however, the reform represents more than administrative adjustment.

“This is about fairness,” a senior Aso Rock source concluded. “Oil and gas revenues must serve Nigerians first. The President has restored that principle.”