Tinubu orders direct remittance of oil revenues to federation account, curbs NNPC deductions

PREIDENT Bola Tinubu has issued a sweeping executive order mandating a fundamental shift in how Nigeria’s oil and gas revenues are collected and distributed, in a move aimed at blocking revenue leakages and strengthening inflows into the federation account.

The directive, which takes immediate effect, restructures long-standing payment channels within the petroleum sector by requiring contractors operating under Production Sharing Contracts (PSCs) to remit statutory payments directly to designated government authorities. The payments covered include royalties, petroleum profit taxes and the federal government’s share of profit oil.

For years, portions of these revenues passed through the Nigerian National Petroleum Company Limited (NPPCL) before being transferred to the federation account. Officials within the presidency argue that this arrangement created room for deductions that were not always transparently reflected in the federal budget framework.

According to a statement released by Director of Information and Public Relations at the presidency, Mr Mohammed Manga, the new order seeks to align petroleum revenue practices with constitutional provisions governing public finance. The administration maintains that oil receipts must flow directly into government accounts without intermediary retention, except where expressly backed by law.

READ ALSO: Multi-billion naira fraud in NNPC puts ex-GMD Kyari on the spot

The order is being described as one of the most far-reaching fiscal adjustments since the introduction of the Petroleum Industry Act (PIA), which restructured Nigeria’s oil and gas sector and commercialised the former state oil corporation. While the PIA granted operational autonomy to the national oil company, it also preserved the principle that revenues due to the federation must be remitted in full.

Under the new directive, the NNPC will no longer collect management fees linked to PSC operations. Frontier exploration levies, previously deducted to fund oil prospecting in inland basins, are also suspended. In addition, gas flare penalties -payments imposed on producers for flaring associated gas – will no longer be routed into the Midstream Gas Infrastructure Fund but instead paid straight into the federation account.

Government sources say the intention is not to weaken the national oil company but to clarify the boundaries between its commercial operations and the federal government’s fiscal rights. By narrowing the scope of deductions at source, the administration hopes to increase the transparency and predictability of monthly revenue accruals.

The timing of the order is significant. Nigeria’s crude production has shown gradual improvement after years of decline caused by theft, pipeline sabotage and underinvestment. International oil prices have also remained relatively supportive compared to the volatility of recent years. Despite these conditions, federal revenue performance has not risen proportionately, intensifying scrutiny over oil income management.

Fiscal analysts note that under PSC frameworks, operators first recover production costs before profit oil is shared. This cost recovery mechanism, while standard globally, can reduce immediate cash flow to government if not tightly monitored. The executive order appears designed to ensure that once statutory obligations are determined, they are paid directly into public accounts without additional layers of internal deductions.

Economists say the measure could improve liquidity at all three tiers of government—federal since allocations from the federation account depend heavily on oil receipts. A more robust and transparent remittance process may also strengthen investor confidence

“The fundamental purpose of the nation’s oil and gas sector, including the national oil company, is to convert hydrocarbon resources into sustainable revenues, investment, and economic activity that benefit the broader economy,” the presidency said.