Tinubu Executive Order 9: NNPC Deductions Cut N1.7 Trillion from Federation Account

• Nigeria's Federation Account deductions decreased by N1.7 trillion in the first half of 2026, as reported by the World Bank.
• President Bola Tinubu's Executive Order 9 of 2026 eliminated specific Nigerian National Petroleum Company Limited deductions and redirected gas flaring penalties.
• The order ended the 30% NNPC management fee and Frontier Exploration Fund deductions from profit oil and gas under specified contracts.
• Gas flaring penalties are now channeled directly to the Federation Account instead of the Midstream and Downstream Gas Infrastructure Fund.
• These changes led to a N2.9 trillion increase in distributed Federation Account revenues, aiming to bolster government finances for federal, state, and local governments.

A pivotal factor in this fiscal rebalancing was President Bola Tinubu's Executive Order 9 of 2026, signed on February 13, which fundamentally altered how certain petroleum revenues and penalties are managed.

The World Bank's recent Nigeria Development Update report has revealed a significant reduction in deductions from Nigeria's Federation Account during the first half of 2026. This period saw a decrease of N1.7 trillion in total deductions, falling from N10.1 trillion in the first half of 2025 to N8.4 trillion in the corresponding period of 2026. This represents a substantial 16.8 percent year-on-year decline.

This positive fiscal development is largely attributed to the Federal Government's strategic intervention, which involved halting specific oil revenue retentions by the Nigerian National Petroleum Company Limited (NNPC Ltd) and redirecting gas-flaring penalties. Consequently, the share of deductions relative to the nation's Gross Domestic Product also saw a notable drop, moving from 4.6 percent to 3.4 percent, a 1.2 percentage point reduction. The direct outcome of these measures was a significant boost in distributed Federation Account revenues, which surged from N7.6 trillion in the first half of 2025 to N10.5 trillion in the first half of 2026, marking an increase of N2.9 trillion, or 38.2 percent.

A pivotal factor in this fiscal rebalancing was President Bola Tinubu's Executive Order 9 of 2026, signed on February 13, which fundamentally altered how certain petroleum revenues and penalties are managed. Specifically, it terminated the Nigerian National Petroleum Company Limited’s entitlement to a 30 percent management fee and the allocation of funds to the Frontier Exploration Fund, both previously deducted from profit oil and profit gas under specified petroleum contracts.

Furthermore, Executive Order 9 redirected the proceeds generated from gas-flaring penalties. These funds, which previously flowed into the Midstream and Downstream Gas Infrastructure Fund, are now mandated to be remitted directly to the Federation Account. This regulatory adjustment was a direct response to concerns raised by the Tinubu administration regarding the substantial amounts of petroleum revenue that were either retained by entities or channeled into various funds before reaching the central Federation Account, thereby reducing the overall revenue available for national distribution.

The primary objective behind these changes, particularly the implementation of Tinubu Executive Order 9 NNPC deductions, was to enhance the revenue pool accessible for distribution among the Federal Government, state governments, and local governments. This move is especially critical given the increasing financial pressures faced by subnational governments, which are grappling with the need to fund essential public services such as infrastructure development, education, healthcare, and security, all while contending with elevated borrowing costs and persistent expenditure demands.

Under the previous framework, established by the Petroleum Industry Act 2021, NNPC Ltd was permitted to deduct a 30 percent management fee, and a similar 30 percent of profit oil and profit gas was allocated to the Frontier Exploration Fund. Additionally, gas-flaring penalties were directed towards supporting gas infrastructure development. The Tinubu administration contended that these arrangements led to a reduction in the Federation's available revenue and created redundant funding mechanisms. Consequently, Executive Order 9 now explicitly directs relevant petroleum contractors to remit specified payments, including royalties, tax oil, and profit oil, directly into the Federation Account, ensuring a more centralized and transparent revenue collection system and a Nigeria Federation Account revenue increase.

Lawyers advising oil and gas companies must ensure their clients' revenue remittance and gas-flaring penalty payment processes comply with Executive Order 9, which redirects specific funds directly to the Federation Account, impacting financial obligations and compliance frameworks under the PIA.

Source: Original reporting via World Bank's Nigeria Development Update.