Abuja — Nigeria’s President Bola Ahmed Tinubu has passed a broad executive order that requires all revenues from oil and gas production to be channeled directly into the Federation Account Allocation Committee (FAAC), a move that he says will promote transparency, reduce revenue leakages, and return rightful constitutional fiscal entitlements to the federal, state, and local governments.
The order, which was gazetted on 13 February and revealed this week, is targeted at deductions and retained funds by the Nigerian National Petroleum Company Limited (NNPC Ltd) and other regulatory bodies, which have traditionally skimmed off some portion of the petroleum revenues before remitting funds into the Federation Account. Under the terms of the order, royalty oil, tax oil, profit oil, and profit gas, as well as any other government interest,s shall be remitted to the account, which should put an end to NNPC’s practice of retaining as much as 60% of funds from petroleum resources under the management fees and frontier exploration funds schemes.
The presidency stated that the order is grounded in Section 5 and 44(3) of the 1999 constitution, with the view to stopping “multiple layers of deductions” which have been diluting revenues for public expenditure and will channel about 14.6 trillion to FAAC based on the forecast of 2025 revenue flows.
Fiscal analysts and academics, who are all supporters, described the order as a “welcome and significant fiscal intervention” that will enhance cash flow certainty and deepen federalism. However, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) criticized the move as an overstep, as an executive order can’t override the Petroleum Industry Act. It expressed concerns over the potential damage to investor confidence and job security.
The order also scraps certain penalties and reallocates some infrastructure funds; future spending of allocated funds will have to follow public procurement laws, and an inter-agency committee led by the Minister of Finance will manage the process.