Nigeria Mandates Direct Remittance of Oil and Gas Revenues to Federation Account
President Tinubu signs Executive Order requiring immediate transfer of petroleum revenues to central treasury, marking significant shift in Nigeria's oil revenue management framework.
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President Bola Tinubu has signed an Executive Order mandating the direct remittance of all oil and gas revenues to the Federation Account, a measure designed to plug revenue leakages and strengthen fiscal transparency in Africa's largest petroleum producer. The directive, issued on February 18, requires immediate implementation across all revenue-generating entities in Nigeria's petroleum sector.
The Executive Order targets revenues from crude oil sales, gas production, petroleum profit tax, royalties, and associated fees currently handled by state-owned enterprises and regulatory agencies. According to Nairametrics, the order specifically directs "the safeguarding and enhancement of oil and gas revenues accruing to the Federation," establishing a framework that bypasses traditional collection mechanisms where revenues passed through multiple intermediary accounts before reaching the Federation Account.
Nigeria's petroleum sector generates approximately 90% of foreign exchange earnings and contributes roughly 50% of government revenues, yet the country has historically struggled with revenue transparency. The Nigerian Extractive Industries Transparency Initiative (NEITI) reported cumulative revenue shortfalls exceeding $20 billion between 2015 and 2020, attributed to delayed remittances, under-declaration, and diversion of funds by revenue-collecting agencies. The new Executive Order appears designed to address these systemic weaknesses by eliminating intermediary holding periods and requiring real-time transfers to the Federation Account managed by the Accountant-General of the Federation.
Implications for State-Owned Enterprises
The directive fundamentally alters operational procedures for the Nigerian National Petroleum Company Limited (NNPC Ltd), the Petroleum Products Pricing Regulatory Agency (PPPRA), and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). These entities have traditionally retained portions of collected revenues to fund operations, subsidies, and capital expenditure before remitting balances to the Federation Account. Under the new framework, all revenues must flow directly to the central treasury, with operational funding subsequently allocated through budgetary appropriations.
NNPC Ltd, which transitioned to a commercial entity in 2022, has operated with significant autonomy over cash flows from crude oil sales and domestic gas supply. Industry analysts estimate the company handles monthly revenues exceeding $4 billion from crude exports alone, based on current production levels of approximately 1.5 million barrels per day and Brent crude prices averaging $75-80 per barrel. The Executive Order effectively subjects these cash flows to immediate government oversight, potentially constraining NNPC's financial flexibility while enhancing accountability.
The order also impacts revenue collection from Production Sharing Contracts (PSCs), Joint Venture arrangements, and the recent Petroleum Industry Act (PIA) fiscal framework. International oil companies operating in Nigeria under these arrangements remit government take through various channels, including direct payments to NNPC and tax payments to the Federal Inland Revenue Service. Standardizing these flows into a single remittance pathway could reduce processing delays and improve revenue forecasting accuracy for federal and state governments dependent on monthly Federation Account allocations.
Fiscal Transparency and Revenue Optimization
The Executive Order aligns with broader fiscal reforms aimed at improving Nigeria's revenue-to-GDP ratio, which stands at approximately 10%—among the lowest globally and well below the Sub-Saharan African average of 17%. Direct remittance mechanisms reduce opportunities for off-budget expenditure and create clearer audit trails for domestic and international oversight bodies. The measure supports Nigeria's commitments under the Extractive Industries Transparency Initiative (EITI) and conditions attached to recent International Monetary Fund engagements.
Implementation challenges include establishing real-time payment infrastructure connecting offshore crude buyers, domestic gas purchasers, and the Federation Account. Nigeria's petroleum exports involve complex payment arrangements through international banks, with settlement periods extending 30-60 days after cargo lifting. Reconciling these commercial realities with immediate remittance requirements will require technical coordination between the Central Bank of Nigeria, commercial banks handling petroleum transactions, and revenue-collecting agencies.
The order's emphasis on "enhancement" of revenues suggests accompanying measures to optimize production, reduce crude oil theft, and improve gas monetization. Nigeria loses an estimated 200,000 barrels per day to theft and pipeline vandalism, representing approximately $5-6 billion in annual foregone revenue at current prices. Direct remittance alone cannot recover these losses without parallel security and infrastructure interventions.
Market and Investment Considerations
For international oil companies and service providers, the Executive Order introduces additional compliance requirements and potential payment processing delays as new remittance protocols are established. Companies operating under cash-call arrangements with NNPC may experience altered payment schedules if the national oil company's cash management authority is constrained. This could affect project financing decisions and investment timing in Nigeria's upstream sector, which requires an estimated $10 billion annually to reverse production declines.
The directive may also influence Nigeria's ability to attract investment in midstream and downstream projects, where revenue predictability and cash flow management are critical for project economics. Gas processing facilities, refineries, and petrochemical plants typically require long-term revenue certainty to secure financing. Increased government control over sectoral cash flows must be balanced against the need for commercial flexibility in these capital-intensive ventures.
State governments receiving monthly allocations from the Federation Account stand to benefit from improved revenue transparency and potentially increased transfers if the order succeeds in capturing previously diverted funds. However, the measure does not address underlying production challenges or commodity price volatility, meaning total distributable revenues remain subject to market conditions and operational performance in Nigeria's petroleum sector.