Flush with oil revenues, Tinubu faces fiscal discipline test

Nigeria’s three tiers of government are swimming in more oil money than they have seen in years. The harder question, one that has defeated administrations before, is whether they will spend it wisely.

President Bola Tinubu signed Executive Order 9 of 2026 on February 13, a sweeping directive that strips the Nigerian National Petroleum Company Limited of its power to deduct management fees and frontier exploration funds before remitting oil revenues to the Federation Account.

The order mandates that all royalty oil, tax oil, profit oil, and profit gas under production sharing contracts be paid directly into the Federation Account, effectively closing a pipeline that the Budget Office of the Federation says had been draining nearly 60 percent of Nigeria’s gross oil revenue under the Petroleum Industry Act 2021.

The timing is significant. Nigeria’s oil and gas revenues had already surged; total oil and gas revenue before deductions jumped to N15.07 trillion in 2024 from N8.36 trillion in 2023, an increase of more than 80 percent, driven by the naira’s sharp depreciation following Tinubu’s foreign exchange reforms and the removal of the petrol subsidy in June 2023.

Now, with the executive order plugging structural leakages on top of that revenue surge, economists say the FAAC buffers, the monthly shared-revenue pool distributed to federal, state, and local governments, are poised for another step-change.

Read also: NNPC: FG faces push back as PENGASSAN rejects executive order

For instance, total PSC profit oil for 2025 stood at N1.511 trillion, against a budgeted N2.368 trillion.

Experts said the deeper test for Tinubu’s administration is not whether it can sign an executive order. It is whether the government can resist the temptation to draw down on improved federation revenues to fund recurrent expenditure growth, pre-election transfers, or politically motivated capital releases in the run-up to 2027.

Wumi Iledare, professor emeritus of petroleum economics and policy research at Louisiana State University’s Centre for Energy Studies, described the order as a significant and timely fiscal intervention.

“Strengthening remittance accountability and improving visibility of petroleum inflows are critical national priorities,” he said. “In a period marked by budgetary strain and debt sustainability concerns, safeguarding public revenues and curbing inefficiencies are not optional; they are imperative.”

Read also: Why I issued executive order on NNPC’s finances— Tinubu

Remaking NNPC’s identity

Beyond the revenue mechanics, analysts say the executive order sends a pointed message to Africa’s largest national oil company about its future role.

“Maybe NNPC will look into the mirror when it comes to its operational cost and refineries that have weakened its bottom line,” said Oluwaseun Onigbinde, director and co-founder of BudgIT, a civic technology organisation that tracks Nigerian public finances. “You are no longer a civil service station. Take responsibility and act like a business. That’s the clear message being passed by the President.”

Iledare concurred on the commercial identity question, but cautioned against reforms that focus narrowly on revenue extraction without addressing deeper governance gaps.

“If reforms focus narrowly on revenue enhancement without strengthening governance effectiveness, structural weaknesses in the sector may persist,” he warned. He also raised a broader strategic question: whether the executive order is a prelude to a formal amendment of the PIA, noting that board appointments to regulatory institutions under the Act, while welcomed, have not yet translated into visible institutional momentum.

The last-mile problem

The central paradox confronting Nigeria’s fiscal narrative is whether the federal government and states have never had more money in the post-subsidy era, yet ordinary citizens are feeling record-breaking levels of pain.

Nigeria’s fiscal history is littered with periods of revenue windfalls that were consumed rather than invested. The commodity boom years of the 2000s swelled the Excess Crude Account before it was quietly drawn down through multilateral extractions.

Headline inflation peaked above 34 percent in 2024 before dropping to 15.1 percent. Real purchasing power has eroded sharply since the naira was floated. And in market stalls from Kano to Port Harcourt, citizens who bore the brunt of subsidy removal, through skyrocketing petrol prices and food costs, see little evidence that the windfall revenues have trickled down.

The structural explanation is well understood by economists. Exchange rate gains, not actual increases in crude production or genuine fiscal surpluses, drove much of the FAAC surge.

Nigeria’s oil output has remained well below its Organisation of Petroleum Exporting Countries quota, averaging roughly 1.5 million barrels per day, far short of the government’s budget benchmark. The naira-denominated value of oil revenues soared because the naira lost more than half its value, a statistical gain that masks the economy’s underlying fragility.

Meanwhile, the 13 percent constitutional derivation fund paid to Nigeria’s nine oil-producing states hit N1.51 trillion in 2025, more than double the N671.92 billion recorded in 2024. Delta State alone received N458.65 billion, nearly a third of the total.

Whether those funds are building roads, hospitals, and schools, or disappearing into procurement rackets and political war chests, is a question state-level accountability mechanisms have repeatedly failed to answer.

“Blocking leakage at the top is necessary but not sufficient,” one Lagos-based fiscal economist said, asking not to be identified because of ongoing advisory relationships with state governments. “The accountability deficit is worst at the local government level, where N3.77 trillion landed in 2024 with almost zero public scrutiny of how it was spent.”