Tinubu’s executive order boosts oil revenue remittance, increases FAAC allocations and strengthens fiscal transparency nationwide
10 Major Gains of Tinubu’s Oil Revenue Reform
President Bola Ahmed Tinubu has introduced a sweeping executive order aimed at restructuring how Nigeria’s oil and gas earnings are collected, retained and remitted — a move analysts say could significantly increase public revenue across all tiers of government.
Nigeria’s oil and gas sector remains the backbone of public finance, yet overlapping deductions and statutory funds have historically reduced what reaches the Federation Account. The new directive seeks to restore direct remittance, eliminate duplications and strengthen fiscal transparency.
Below are the 10 major gains from the reform and why they matter for Nigeria’s economy:
1. Higher Government Revenue Inflows
Major deductions that previously reduced public earnings have now been removed or redirected. These include:
- Elimination of the 30% management fee on profit oil and gas
- Transfer of the 30% Frontier Exploration allocation to the Federation Account
- Central remittance of gas flare penalties
These changes mean substantially more oil revenue will now flow directly into public coffers.
2. Restoration of Constitutional Revenue Sharing
Higher inflows into the Federation Account automatically raise allocations under the FAAC vertical sharing formula:
- Federal Government — 52.68%
- State Governments — 26.72%
- Local Governments — 20.60%
- Oil-producing states — additional 13% derivation
Direct remittance therefore translates into immediate financial gains nationwide.
3. Elimination of Excessive Revenue Retention
Multiple retention layers within the petroleum financing structure have been dismantled, including:
- 20% profit retention for working capital
- 30% management fee on profit oil and gas
- 30% allocation to frontier exploration
Removing two major layers significantly improves the public share of petroleum income.
4. Mandatory Direct Remittance by Contractors
Operators under production sharing, profit sharing and risk service contracts must now remit royalty oil, tax oil, profit oil and other statutory entitlements directly into the Federation Account.
By eliminating intermediary handling, the reform reduces leakages at the collection stage.
5. Stronger Fiscal Transparency
With fewer institutions managing oil funds before remittance, revenue flows become easier to track, audit and verify — strengthening accountability and reducing opaque deductions.
6. More Funds for National Priorities
Resources previously locked in sector-specific deductions are now available for:
- Security
- Healthcare
- Education
- Infrastructure
- Energy transition investments
This enhances the developmental impact of oil revenue.
7. Reduced Idle Exploration Spending
The redirection of 30% frontier exploration allocations limits the risk of idle or speculative spending, promoting disciplined fiscal management.
8. Clearer Commercial Role for NNPC Limited
The order separates revenue collection from commercial operations, allowing NNPC Limited to function strictly as a market-driven entity while statutory earnings go directly to government.
9. Streamlining Overlapping Petroleum Funds
The reform addresses duplication under the Petroleum Industry Act framework by simplifying overlapping funds and deductions, improving fiscal efficiency and lowering administrative costs.
10. Stronger Budget Stability
Higher and more predictable oil revenue improves:
- Budget planning
- Debt sustainability
- Fiscal deficit management
- Macroeconomic stability
It also lays the foundation for broader modernization of Nigeria’s petroleum fiscal framework.
A Structural Reset for Oil Revenue
Economic observers describe the executive order as a structural reset in Nigeria’s oil revenue architecture — one that shifts focus from internal retention to national redistribution. Read More
