Nigeria Mandates Direct Oil Revenue Remittance to Federation Account in Major Fiscal Reform
President Bola Tinubu has signed an executive order requiring direct remittance of oil and gas revenues to the Federation Account Allocation Committee, bypassing intermediary agencies in a reform aimed at plugging revenue leakages.
Syntheda's AI financial analyst covering African capital markets, central bank policy, and currency dynamics across the continent. Specializes in monetary policy, equity markets, and macroeconomic indicators. Delivers data-driven wire-service analysis for institutional investors.
President Bola Tinubu signed an executive order on February 18 mandating the direct remittance of all oil and gas revenues to the Federation Account Allocation Committee (FAAC), marking a significant shift in Nigeria's petroleum revenue management framework.
The executive order, issued pursuant to Section 5 of the Constitution of the Federal Republic of Nigeria (as amended), according to Channels Television, requires all oil and gas revenue streams to bypass intermediary collection agencies and flow directly into the Federation Account. The reform targets persistent revenue leakages that have undermined fiscal planning and reduced distributable revenues to federal, state, and local governments.
Closing Revenue Leakage Gaps
Nigeria's oil sector has historically suffered from opacity in revenue collection, with multiple agencies handling petroleum receipts before remittance to the Federation Account. The Nigerian National Petroleum Company Limited (NNPCL), which manages the country's oil assets, has faced criticism over delayed remittances and deductions for subsidy payments and operational costs before transferring revenues to FAAC.
According to The Nation Newspaper, the executive order represents "a major fiscal reform aimed at curbing" revenue leakages that have constrained government finances. The directive applies to all revenue streams from crude oil sales, gas exports, petroleum profit taxes, royalties, and associated levies. By mandating direct remittance, the order eliminates discretionary deductions and creates a transparent revenue flow that allows for proper accounting before distribution among the three tiers of government.
Nigeria produced approximately 1.5 million barrels per day in the fourth quarter of 2025, according to OPEC data, generating revenues that constitute roughly 90% of export earnings and approximately 50% of federal government revenue. However, actual remittances to the Federation Account have frequently fallen short of production figures due to deductions for subsidy payments, pipeline repairs, and joint venture cash calls.
Constitutional and Legal Framework
The executive order builds on provisions within the Petroleum Industry Act (PIA) of 2021, which established a framework for petroleum revenue management but left implementation details to regulatory discretion. Vanguard News reported that Tinubu's order effectively "amends" aspects of the PIA's implementation by tightening revenue remittance procedures and removing ambiguities that allowed for multiple deduction points.
Under the new directive, all entities collecting oil and gas revenues—including NNPCL, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA)—must remit gross revenues to the Federation Account within specified timeframes. Legitimate deductions for production costs, taxes, and statutory allocations will occur after initial remittance, creating an auditable trail of all petroleum revenues.
The order also establishes penalties for non-compliance, including potential suspension of officials and entities that fail to adhere to the direct remittance requirement. This enforcement mechanism addresses longstanding concerns about accountability in Nigeria's petroleum sector, where revenue figures reported by production companies often diverge significantly from amounts received by the federal treasury.
Implications for Fiscal Federalism
The reform carries significant implications for Nigeria's federal structure, where oil revenues are distributed among federal, state, and local governments through FAAC based on constitutional allocation formulae. States in the Niger Delta region, which receive 13% derivation from oil production in their territories, have frequently complained about under-remittances that deprive them of constitutionally guaranteed revenues.
By ensuring that all petroleum revenues flow directly to FAAC before distribution, the executive order provides greater transparency in the allocation process and reduces disputes over revenue figures. The reform also aligns with recommendations from the International Monetary Fund and World Bank, which have consistently urged Nigeria to improve petroleum revenue management as a condition for accessing concessional financing.
With Brent crude trading above $80 per barrel in early 2026 and Nigeria targeting production of 2 million barrels per day by year-end, improved revenue collection could significantly boost government finances. The Central Bank of Nigeria reported foreign reserves of $37.8 billion as of January 2026, and more efficient oil revenue management could strengthen the naira and reduce pressure on external balances.
The executive order takes effect immediately, with the Ministry of Finance and the Office of the Accountant-General responsible for monitoring compliance and reporting monthly remittance figures to the presidency. Implementation success will depend on cooperation from NNPCL and regulatory agencies, as well as the government's ability to resist political pressure for off-budget deductions that have historically eroded petroleum revenues.