Executive order redirects 30% NNPC deductions and gas flare penalties, unlocking billions for FAAC allocations
Abuja: President Bola Tinubu’s Feb. 13 executive order suspending 30% NNPC deductions and redirecting gas flare penalties is set to unlock billions in oil revenues for the Federation Account Allocation Committee (FAAC), boosting monthly allocations and tightening fiscal discipline.
The Minister of State for Finance, Dr Doris Uzoka-Anite, and the Chairman, while addressing members of FAAC in Abuja on Friday, Uzoka-Anite said that the presidential executive order would safeguard oil and gas revenues.
She added that the order would provide regulatory clarity and strengthen revenues to the federation account.
The minister called the order a structural fiscal correction aimed at restoring constitutional discipline to petroleum revenue management and enhancing distributable income across all levels of government.
She noted the revenue outlook was improving due to ongoing structural reforms by the Federal Government.
According to her, new tax reforms are broadening the base, improving compliance, and increasing administrative efficiency.
“The Feb. 13 executive order by Mr President reinforces revenue discipline in the oil and gas sector and reduces leakages,” she said.
The minister said the order suspends the 30 per cent allocation to the Frontier Exploration Fund (FEF) and the 30 per cent management fee on oil and gas profit payable to NNPC Limited.
She said the order directed gas flare penalties be paid into the federation account and required that petroleum revenues be fully remitted without unconstitutional deductions.
Uzoka-Anite said the reform shifts from a retention-based model to a gross remittance, federation-first oil revenue model.
“The implications for FAAC are very significant; more oil and gas profit will now flow directly into the federation account.
Gas flare penalties will be treated as distributable revenue, and former management fees will not reduce remittable inflows, she said.
She expects these reforms to boost monthly revenue and increase federal, state, and local allocations.
Uzoka-Anite said that a retrospective audit of the FFF, the Midstream and Downstream Gas Infrastructure, was due, and NNPC management fee deductions could lead to recoveries that may provide a one-off fiscal boost.
She welcomed the stronger revenue outlook and warned of risks from sudden liquidity injections.
Experience shows that sharp, immediate revenue rises can increase inflation, complicate monetary management, and reduce the real value of allocations, she noted.
She said excess demand, exchange rate pressure, asset distortions, and inflation risks could arise if inflows are not managed.
Uzoka-Anite proposed phased disbursement of one-off recoveries to manage such risks.
She suggested staggering retrospective recoveries and temporarily warehousing a portion in a stabilisation buffer.
She also advised strengthening the excess crude and stabilisation buffer to channel part of the increased inflows into a fiscal stabilisation window.
This would offset revenue shortfalls and reduce spending procyclicality during weaker months, she said.
According to her, coordination with the CBN would align fiscal injections with liquidity management and support open market operations.
Uzoka-Anite urged states and federal Ministries, Departments and Agencies (MDAs) to prioritise capital expenditure over recurrent expenditure.
He called for investment in infrastructure, agriculture, energy, and other productive sectors, and for avoiding unsustainable wage or consumption spikes.
“Productive spending expands supply capacity and mitigates inflation,” she said.
She announced plans to introduce monthly revenue dashboards, reconciliation reports, and clear reporting of new inflows from reforms and the executive order.
Uzoka-Anite said the reforms offer a chance to deepen fiscal federalism, enhance revenue, restore clarity, and strengthen trust among governments.
She said that increased revenue must not translate into fiscal complacency.
We must avoid treating extra inflows as permanent windfalls.
We should reduce debt, clear arrears responsibly, build buffers, and invest in growth sectors, she said.
