Nigeria Tightens Revenue Controls as Tinubu's Executive Order Targets Oil Sector Leakages
President Bola Tinubu has signed an executive order mandating direct payment of oil and gas revenues into the Federation Account, a move the Revenue Mobilisation Allocation and Fiscal Commission says will curb leakages and boost government coffers.
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Nigeria's federal government has intensified efforts to plug revenue leakages in the oil and gas sector through an executive order signed by President Bola Tinubu this week, directing that all petroleum revenues be paid directly into the Federation Account.
The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) endorsed the directive, stating it would significantly reduce financial leakages that have historically undermined government revenue collection. According to The Nation Newspaper, the commission described the executive order as a critical intervention to ensure transparency in revenue management and increase the inflow of funds available for distribution to federal, state, and local governments.
Addressing Systemic Revenue Challenges
The executive order comes amid persistent concerns about revenue transparency in Africa's largest oil producer, where opaque payment systems have long facilitated the diversion of petroleum proceeds. Nigeria's oil sector accounts for approximately 90 percent of foreign exchange earnings and roughly half of government revenue, making effective collection mechanisms essential for fiscal stability.
By mandating direct payments into the Federation Account, the government aims to eliminate intermediary channels where revenues have historically disappeared before reaching the treasury. The RMAFC, which is constitutionally responsible for monitoring revenue accruals and their distribution, indicated that the measure would enhance accountability across the petroleum value chain.
The policy shift forms part of broader economic reforms under Tinubu's administration, which has implemented several controversial measures since taking office in May 2023, including the removal of fuel subsidies and the floating of the naira. These reforms have generated significant economic turbulence, with inflation reaching multi-decade highs and the currency depreciating sharply against major currencies.
Inflation Shows Signs of Moderation
Despite the economic disruption caused by these reforms, new data suggests the government's policies may be beginning to yield results. A policy brief cited by This Day newspaper indicates that Nigeria's inflation trajectory is "showing signs of a decisive turnaround," with the reforms under Tinubu's Renewed Hope Agenda "directly" contributing to the moderation.
The report marks a potentially significant development for an economy where inflation has consistently exceeded 30 percent in recent months, eroding purchasing power and fueling public discontent. If sustained, the downward trend would provide the administration with evidence that its painful economic adjustments are producing the intended stabilization effects.
The inflation data comes at a critical juncture as the government seeks to balance fiscal consolidation with the need to maintain social stability. Nigeria's economic restructuring has sparked protests and labour disputes, with unions demanding wage increases to offset the impact of subsidy removal and currency devaluation on living costs.
State-Level Investment Push
Beyond federal initiatives, state governments are also positioning themselves to attract investment amid the economic transformation. Ondo State Governor Lucky Aiyedatiwa told investors his administration is implementing "bold reforms and strategies aimed at repositioning the state for sustainable" development, according to This Day.
Aiyedatiwa's comments reflect a broader trend among Nigerian state governors seeking to leverage federal economic reforms to enhance their own investment climates. With the federal government focused on macroeconomic stabilization, states are increasingly competing to attract both domestic and foreign capital for infrastructure development and job creation.
The convergence of federal revenue management reforms, moderating inflation, and state-level investment initiatives suggests a coordinated approach to economic restructuring across government tiers. However, the sustainability of these improvements will depend on the government's ability to maintain policy consistency while managing the social costs of adjustment.
The executive order on oil revenues represents a test case for institutional reform in Nigeria's petroleum sector, where previous attempts at transparency have often faltered due to vested interests and weak enforcement. Success in implementing the direct payment system could establish a template for broader governance improvements across the economy.