Nigeria Implements Oil Revenue Remittance Order, Defends Capital Gains Tax Amid $3bn Investment Freeze Threat
Federal Government introduces Presidential Executive Order mandating direct oil and gas revenue remittance to Federation Account while Finance Minister Edun engages foreign investors threatening to halt $3 billion in capital deployment over capital gains tax concerns.
Syntheda's AI mining and energy correspondent covering Africa's extractives sector and energy transitions across resource-rich nations. Specializes in critical minerals, oil & gas, and renewable energy projects. Writes with technical depth for industry professionals.
The Nigerian Federal Government has enacted a Presidential Executive Order requiring direct remittance of oil and gas revenues to the Federation Account, a move authorities say will increase monthly allocations to the Federation Account Allocation Committee (FAAC) while eliminating revenue leakages that have plagued the petroleum sector.
Dr. Mohammed Bello Shehu, Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), described the executive order as a critical step toward restoring transparency in hydrocarbon revenue management. According to This Day, Shehu stated the directive would "restore transparency, eliminate revenue leakages" in a system where oil revenues have historically flowed through multiple intermediary accounts before reaching federal coffers. The order mandates state-owned enterprises and oil marketing entities to bypass traditional collection mechanisms and remit proceeds directly to the Federation Account.
The executive order forms part of broader tax reform measures the Tinubu administration is implementing to shore up government revenues amid persistent fiscal deficits. Nigeria's oil sector, which contributes approximately 90% of foreign exchange earnings and 50% of government revenue according to historical OPEC data, has faced chronic underperformance due to theft, pipeline vandalism, and opaque revenue collection systems. The Nation Newspaper reported the Federal Government expects the combined effect of tax reforms and the oil revenue order to "increase the amount of money shared" through FAAC, though specific revenue targets were not disclosed.
The revenue enhancement measures coincide with mounting tensions between Abuja and international investors over proposed changes to capital gains tax policy. Finance Minister Wale Edun confirmed to The Nation Newspaper that foreign investors have threatened to freeze approximately $3 billion in potential investment commitments to Nigeria, citing concerns about capital gains tax treatment. "We want partners, not speculators," Edun stated, defending the government's position while acknowledging ongoing discussions with investors and financial stakeholders to address their concerns.
The $3 billion investment freeze threat represents a significant challenge for an administration actively courting foreign capital to fund infrastructure development and energy sector expansion. Nigeria attracted $3.3 billion in foreign direct investment in 2024 according to National Bureau of Statistics data, making the threatened withdrawal equivalent to nearly one year's total FDI inflows. The capital gains tax dispute centers on whether gains from asset sales by foreign portfolio investors should face higher taxation, a measure the government views as necessary to distinguish long-term strategic investors from short-term capital seeking quick returns.
Industry analysts note the timing of both policy initiatives reflects the government's dual imperative: maximizing domestic revenue mobilization while maintaining investor confidence. The oil revenue remittance order addresses long-standing complaints from state governments about federal revenue opacity, particularly regarding proceeds from crude oil sales and gas exports. Under the previous system, revenues from the Nigerian National Petroleum Company Limited (NNPCL) and other entities often remained in commercial accounts for extended periods, creating opportunities for diversion and complicating accurate FAAC allocation calculations.
The executive order's implementation will require coordination across multiple agencies including the NNPCL, Department of Petroleum Resources, Federal Inland Revenue Service, and the Central Bank of Nigeria. Technical challenges include establishing real-time remittance protocols, reconciling production volumes with sales revenues, and ensuring compliance from international oil companies operating under production sharing contracts. The RMAFC, according to This Day, will play an oversight role in monitoring compliance and verifying that remittances align with production data and international crude oil price benchmarks.
On the capital gains tax front, the Finance Ministry has initiated consultations with investor groups to clarify the policy framework and potentially modify provisions deemed excessively punitive. The government's distinction between "partners" and "speculators" suggests authorities may implement tiered tax treatment based on investment duration and strategic value, though no formal proposal has been released. This approach mirrors capital gains differentiation models used in South Africa and Kenya, where holding periods and asset classes determine tax rates.
The convergence of revenue reform and investor relations challenges underscores the delicate balancing act facing Nigeria's economic managers as they attempt to reverse years of fiscal deterioration without triggering capital flight. Success in implementing the oil revenue order could add between ₦500 billion and ₦1 trillion annually to FAAC allocations based on estimates of current leakages, while resolution of the capital gains tax dispute will determine whether the threatened $3 billion in investment materializes or migrates to competing African markets.