Tinubu Targets Revenue Leakages, Orders Direct Remittance of Oil and Gas Proceeds

Sunday Ehigiator

President Bola Ahmed Tinubu has intensified efforts to plug longstanding leakages in Nigeria’s oil and gas revenue system with a sweeping executive order mandating direct remittance of key petroleum proceeds into the Federation Account.

Presidency and Aso Rock sources describe the move as a “decisive intervention” aimed at dismantling complex retention layers that weakened inflows to the Federation Account and constrained national development.

At the heart of the directive is a requirement that royalty oil, tax oil, profit oil, profit gas and all other government entitlements under Production Sharing Contracts (PSCs), profit-sharing and risk service contracts be paid directly into the Federation Account — without intermediary retention.

“This reform is about transparency and fiscal justice,” a senior presidency official said. “Oil and gas revenues must first reach the Federation before any allocation mechanism is applied. That principle is now restored.”

Breaking the Retention Chain

Under the implementation framework of the Petroleum Industry Act (PIA), only 40 percent of PSC profit oil flowed into the Federation Account. The remaining 60 percent was retained by the Nigerian National Petroleum Company Limited (NNPC), divided between a 30 percent management fee and a 30 percent Frontier Exploration Fund.

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

Presidency insiders argue that while the PIA aimed to modernise the sector, aspects of its implementation introduced structural distortions that allowed revenue diversion before remittance.

“When revenue is sliced before reaching the Federation Account, transparency suffers,” an Aso Rock adviser said. “The President has simplified the pipeline — direct remittance, full visibility, constitutional compliance.”

Restoring Revenue Stability

Officials say the previous structure contributed to volatility in Federation inflows. Because significant sums were retained as management fees and frontier allocations, the Federation increasingly relied on dividend declarations from NNPC rather than direct oil sale proceeds.

“Dividend substitution introduced uncertainty,” a presidency source explained. “National budgeting cannot rest on projected dividends. Direct remittance is more reliable.”

By restoring first-line remittance into the Federation Account, the executive order re-establishes a stable revenue base for federal, state and local governments.

Gas Flare Penalties and Infrastructure Oversight

The directive also mandates that gas flare penalties collected by the Nigerian Upstream Petroleum Regulatory Commission be paid directly into the Federation Account.

Previously, portions of these revenues flowed into designated infrastructure funds, including the Midstream and Downstream Gas Infrastructure Fund.

Presidency sources confirm that while infrastructure development remains a priority, expenditure from such funds must now comply strictly with public procurement laws and standard budgetary oversight.

“This ensures transparency and eliminates fragmented oversight,” an official said. “Public funds must be subject to public accountability.”

Protecting Constitutional Revenue Rights

Legal advisers within government circles maintain that Sections 44(3) and 162 of the Constitution provide clear guidance on revenue administration. Section 44(3) vests ownership and control of mineral resources in the Government of the Federation, while Section 162 requires all revenues accruing to the Federation to be paid into the Federation Account.

“The executive order restores constitutional sequencing,” a presidency official noted. “Revenue first, allocation second.”

According to Aso Rock sources, the President invoked Section 5 of the Constitution, which vests executive authority in his office, to implement the reform pending broader legislative review.

Ending Automatic Frontier Deductions

The removal of the 30 percent Frontier Exploration Fund deduction is one of the most consequential aspects of the order. Although frontier exploration was intended to expand Nigeria’s reserve base, presidency officials argue that funding mechanisms must not undermine Federation entitlements.

“Exploration remains important,” a source said. “But automatic deductions before remittance are inconsistent with fiscal discipline.”

Officials indicate that future exploration initiatives will be funded transparently through appropriations subject to oversight.

Reasserting NNPC’s Commercial Mandate

The executive order also eliminates the automatic 30 percent management fee previously retained by NNPC on profit oil and profit gas.

Presidency insiders say this reinforces NNPC’s transition into a purely commercial enterprise.

“NNPC must operate like any other commercial company,” an adviser said. “It earns revenue, declares profits, and pays dividends. It does not retain sovereign revenue before remittance.”

FAAC records indicate that management fees and frontier deductions each accounted for roughly N453 billion in 2025, highlighting the scale of the adjustment.

Gains for Subnational Governments

State and local governments, heavily dependent on FAAC allocations, are expected to benefit from fuller remittance flows.

“With direct remittance, allocations become more predictable,” an official familiar with FAAC processes said. “That stability is crucial for infrastructure, healthcare, education and security spending.”

Presidency officials argue that the directive strengthens fiscal federalism by ensuring equitable distribution of national resources.

A Defining Reform Moment

Stakeholders, including transparency advocates and legislative committees, have long raised concerns about opaque deductions and delayed remittances in the oil and gas sector. Presidency sources say the executive order directly addresses those concerns.

“This is about closing loopholes,” one official said. “The Federation must have clear line-of-sight over every barrel and every naira.”

An implementation committee has been approved to oversee coordinated execution, with officials expecting the effects to reflect in upcoming FAAC allocations.

“This reform will not remain theoretical,” an Aso Rock insider stated. “Its impact will be visible in revenue distribution.”

For the Tinubu administration, the directive signals a governance approach anchored in accountability and constitutional order.

“Nigeria can no longer afford revenue leakages in its primary income sector,” a senior presidency official concluded. “The President has acted to protect national wealth and strengthen our fiscal foundation.”