Tinubu moves to restore constitutional order in oil revenue administration
President Bola Ahmed Tinubu’s sweeping Executive Order on oil and gas revenue remittances is being framed by presidency insiders as a constitutional recalibration aimed at restoring the supremacy of the
- By Bola Joseph
President Bola Ahmed Tinubu's sweeping Executive Order on oil and gas revenue remittances is being framed by presidency insiders as a constitutional recalibration aimed at restoring the supremacy of the Federation Account in Nigeria's fiscal architecture.
At the centre of the directive is a reaffirmation of Sections 44(3) and 162 of the 1999 Constitution, which vest ownership and control of mineral resources in the Government of the Federation and require that all revenues accruing to the Federation be paid into the Federation Account.
According to senior Aso Rock sources, the President's action addresses structural distortions that emerged during implementation of the Petroleum Industry Act (PIA), particularly in relation to Production Sharing Contract (PSC) revenues.
“This is fundamentally about constitutional alignment,” a presidency official said. “Where a statutory framework creates revenue retention mechanisms that prevent funds from first entering the Federation Account, the executive has a duty to correct that.”
Reasserting the Federation's primacy
Since the PIA took effect in 2021, only 40% of PSC profit oil was reportedly remitted to the Federation Account. The remaining 60% was retained under two heads — a 30% Frontier Exploration Fund (FEF) and a 30% management fee for the Nigerian National Petroleum Company Limited (NNPC).
Presidency sources argue that this arrangement altered the traditional principal-agent balance between the Federation and its national oil company.
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“In simple terms, the Federation is the owner. NNPC is the agent,” a senior Aso Rock adviser explained. “When the agent retains the majority of revenue before remittance, the balance shifts in a way that raises constitutional and fiscal concerns.”
The Executive Order now mandates that royalty oil, tax oil, profit oil, profit gas and other government entitlements under PSCs and related contracts be paid directly into the Federation Account.
Addressing constitutional tensions
Legal advisers within government circles maintain that while the PIA sought to modernise the petroleum sector, aspects of its revenue retention structure created tension with constitutional provisions.
Section 162(1) states that all revenues collected by the Government of the Federation shall be paid into the Federation Account, except as otherwise prescribed by the Constitution itself.
Presidency sources argue that deductions such as management fees and frontier allocations, if legitimate, must occur only after full remittance.
“The principle is straightforward,” one source said. “Revenue must first enter the Federation Account. Any subsequent allocation or funding mechanism must follow transparent and lawful processes.”
By invoking Section 5 of the Constitution, which vests executive authority in the President, Tinubu's directive seeks immediate compliance pending legislative review.
Financial records underscore the shift
Submissions to the Federation Account Allocation Committee (FAAC) in 2025 indicate that revenue streams affected by the order amounted to approximately N14.57 trillion.
These include PSC management fees and Frontier Exploration Fund deductions totaling about N906.91 billion, oil and gas royalties exceeding N7.5 trillion, gas flare penalties of over N600 billion and tax revenues previously administered under petroleum-specific frameworks.
Presidency officials insist the reform is less about headline figures and more about structural clarity.
“This is not a numbers game,” a senior official said. “It is about ensuring that constitutional processes are respected in revenue administration.”
Frontier Exploration under review
The scrapping of the 30% Frontier Exploration Fund retention has drawn attention, given its goal of financing exploration in high-risk basins outside the traditional Niger Delta.
However, Aso Rock insiders maintain that exploration funding must align with constitutional requirements.
“Frontier exploration remains important for energy security,” an adviser said. “But funding mechanisms must not override the Federation's primary entitlement to revenue.”
Under the new framework, exploration funding is expected to proceed through standard budgetary appropriations and oversight mechanisms.
Reinforcing NNPC's commercial identity
The executive order also removes the automatic 30 percent management fee previously retained by NNPC on PSC profit oil and profit gas.
According to presidency sources, this strengthens NNPC's transformation into a fully commercial enterprise.
“NNPC cannot function simultaneously as operator, revenue-retainer and quasi-fiscal authority,” one official remarked. “The President's directive clarifies roles and strengthens accountability.”
Insiders emphasize that NNPC will continue operating commercially but must now rely on transparent revenue and cost structures rather than automatic deductions from Federation entitlements.
Transparency and fiscal federalism
The order further requires operators under PSCs to remit royalty oil, tax oil and profit oil directly into the Federation Account, rather than routing proceeds through intermediary structures.
“This eliminates ambiguity,” a presidency source said. “Every barrel due to the Federation must be traceable from source to account.”
Officials believe this will enhance confidence among subnational governments, whose allocations depend on accurate remittance data.
The directive also mandates that gas flare penalties collected by the Nigerian Upstream Petroleum Regulatory Commission be paid into the Federation Account, while expenditures from the Midstream and Downstream Gas Infrastructure Fund must comply strictly with public procurement laws.
“With stronger remittance discipline, allocations become more predictable,” an official familiar with FAAC processes said. “That stability is crucial for planning and service delivery.”
Toward legislative refinement
While the executive order takes immediate effect, Tinubu has announced plans for a comprehensive review of the PIA to address structural and fiscal anomalies.
“The President is not dismantling reform,” one aide clarified. “He is refining it to ensure constitutional coherence.”
Observers view the move as part of a broader governance philosophy emphasizing fiscal discipline and institutional accountability.
“Nigeria can no longer afford structural revenue leakages,” a presidency official stated. “This reform signals that constitutional order is not negotiable.”
As implementation progresses and FAAC allocations reflect the changes, the Presidency maintains that the reform's significance extends beyond fiscal gains.
“This is about principle,” a senior Aso Rock source concluded. “The Constitution must guide revenue governance. The President has reaffirmed that commitment.”
