New oil revenue order will boost FAAC allocations - FG
The Federal Government says its newly introduced tax reform measures and the Presidential Executive Order on oil and gas revenue remittance will increase the amount of money shared by the
The Federal Government says its newly introduced tax reform measures and the Presidential Executive Order on oil and gas revenue remittance will increase the amount of money shared by the three tiers of government and strengthen the Federation Account.
The Minister of State for Finance, Doris Uzoka-Anite, spoke in Abuja on Friday at the opening session of the February meeting of the Federation Account Allocation Committee. She told journalists that the reforms are designed to widen the tax net, improve compliance, and make revenue collection more efficient, while the presidential order will enforce discipline in the oil and gas sector and stop leakages.
“These reforms are expected to boost FAAC distributable income in a sustained manner,” she said.
Uzoka-Anite explained that the Executive Order is more than a routine directive. According to her, it is a major fiscal correction meant to restore constitutional rules in the way petroleum revenue is handled and to ensure more funds reach the Federation Account for the benefit of Nigerians.
She said the order targets long-standing problems such as off-budget deductions, retained management fees, diversion of gas flare penalties, and fragmented remittance systems. She explained that it suspends the 30 per cent allocation previously set aside for the Frontier Exploration Fund and also suspends the 30 per cent management fee on profit oil and gas payable to NNPC Limited. In addition, gas flare penalties must now be paid directly into the Federation Account, while all petroleum revenues must be remitted in full without deductions not recognised by law.
She described the reform as a shift from what she called a retention-based system to a “gross remittance, Federation-first model,” meaning revenues will now be paid in full before any other consideration.
The minister said the combined effect of the tax reforms and the order will be significant for government finances. She noted that more profit from oil and gas will flow straight into the Federation Account, gas flare penalties will become part of distributable revenue, and previously retained charges will no longer reduce what is shared. She added that this could lead to higher monthly inflows, increased allocations to federal, state, and local governments, higher derivation payments to oil-producing states, and more predictable cash flow for public spending.
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She also disclosed that a review of past deductions involving certain oil funds and management fees could result in recoveries that may provide a one-time financial boost. “This reform strengthens FAAC by creating a broader tax base as well as ensuring that constitutionally due revenues are fully remitted,” she said.
Uzoka-Anite, however, warned that higher revenue must be handled carefully. She said sudden increases in funds shared across government levels could raise demand in the economy, put pressure on exchange rates, distort asset prices, and fuel inflation if not properly managed. “Our task is not only to distribute revenue. It is to safeguard macroeconomic stability,” she stated.
To prevent such risks, she said authorities are considering spreading out payments from any recovered funds instead of releasing them all at once. Part of the money, she said, could be kept temporarily in a stabilisation buffer so that excess cash does not flood the system at the same time.
She added that FAAC may also channel part of the new inflows into a reserve mechanism that can be used when revenues drop in weaker months. According to her, such buffers help governments maintain steady spending and avoid sharp swings in the economy.
Uzoka-Anite said closer coordination with the Central Bank of Nigeria will also be important so that fiscal spending and monetary policy move together. She explained that this cooperation will help manage liquidity levels and prevent the sudden expansion of the money supply that could destabilise prices.
She urged federal and state agencies to focus on productive projects rather than increasing recurrent spending. “States and MDAs should prioritise capital expenditure, invest in infrastructure, agriculture, energy, and other productive sectors, and avoid unsustainable wage or consumption spikes,” she said, noting that investments that expand production help control inflation.
The minister also announced plans for stronger transparency measures, including monthly revenue dashboards, reconciliation reports comparing production and remittance figures, and clear disclosure of additional inflows linked to the reforms and the executive order. She said transparency will promote discipline and build trust among all levels of government.
According to her, the reforms present a chance to deepen fiscal federalism, improve revenue sharing, and strengthen confidence between federal, state, and local authorities. She warned, however, that higher earnings should not be treated as permanent windfalls. Instead, she advised governments to use extra funds to reduce debt, clear outstanding obligations, build savings buffers, and invest in sectors that support long-term growth.
She explained that experience shows that when large sums enter the system suddenly, prices may rise quickly and reduce the real value of the same allocations being shared. “When too much liquidity enters the system at once, prices can rise in a way that erodes the value of the very allocations we are distributing,” she said.
Uzoka-Anite concluded that careful planning and disciplined management of increased revenue will be necessary to ensure that the benefits of the reforms translate into real economic gains for citizens rather than short-term spending pressures.
