A constitutional and political economy analysis of the President’s Executive Order mandating full oil revenue remittance into the Federation Account, and what it means for subnational autonomy, productivity, and the future of Nigeria’s federal structure.
When President Bola Ahmed Tinubu recently issued the Presidential Executive Order on the Remittance of Oil and Gas Revenues into the Federation Account, 2026, directing that all oil and gas revenues be paid directly into the Federation Account, the announcement was framed as a reform measure, one aimed at transparency, uniformity, and fiscal discipline. On its surface, the directive appears administratively sound. In a country long troubled by revenue opacity and remittance controversies, few would object to clarity.
Yet beneath that tidy administrative logic lies a deeper constitutional and political economy question: Is this fiscal reform, or fiscal recentralisation?
Nigeria’s constitutional architecture is not unitary. It is federal. And federalism is not merely a descriptive label; it is a structural commitment embedded in the 1999 Constitution of the Federal Republic of Nigeria (as amended). Section 162 establishes the Federation Account into which “all revenues collected by the Government of the Federation” shall be paid, except those expressly exempted. It further provides for distribution among the three tiers of government according to a revenue allocation formula approved by the National Assembly.
On its face, the Executive Order aligns with Section 162. But constitutional compliance is not identical to constitutional coherence. The question is not whether the directive can be defended textually; the question is whether it strengthens the spirit of fiscal federalism.
Federalism presupposes shared sovereignty. Sections 4 and 5 of the Constitution distribute legislative and executive powers between the federal and state governments, while the Second Schedule delineates the Exclusive and Concurrent Lists. States are not administrative appendages of Abuja; they are federating units with defined constitutional responsibilities. Local governments, recognised under Section 7, also form part of this architecture.
Fiscal federalism is the financial expression of that arrangement. In theory, revenue authority and expenditure responsibility should be aligned as closely as possible. If states are constitutionally responsible for primary education, healthcare delivery, intra-state infrastructure, agriculture extension, and security support functions, their fiscal framework must provide meaningful autonomy to discharge those duties.
The challenge in Nigeria has never simply been that revenues are pooled in the Federation Account. The deeper challenge has been the political economy of rent distribution.
Nigeria remains a classic rentier state. Oil revenue is externally generated, centrally collected, and politically redistributed. This structure weakens the accountability bond between subnational governments and their citizens. Governors often look upward to the Federation Account Allocation Committee rather than downward to their tax bases. Internally generated revenue becomes supplementary rather than foundational.
Directing all oil and gas revenues into the Federation Account may indeed improve bookkeeping discipline. It may close loopholes in remittance practices, particularly in light of the restructuring under the Petroleum Industry Act, which commercialised NNPC into NNPC Limited and altered revenue reporting structures. It may reduce discretionary opacity in oil-related inflows. But it does not, by itself, answer the more fundamental question: how do we incentivise subnational productivity? Recentralisation without productivity reform risks reinforcing dependency.
Comparative federations offer perspective. In the United States, the federal government collects income taxes, corporate taxes, and customs duties, but states retain robust taxing authority. Sales taxes, state income taxes in many jurisdictions, and property taxes administered at local levels provide substantial fiscal independence. States do not depend on Washington for monthly survival allocations. Fiscal competition among states creates incentives for economic development and administrative efficiency.
In Canada, a resource-rich federation with provincial diversity, provinces such as Alberta exercise significant control over natural resource revenues within their territories. Equalisation transfers exist to reduce disparities, but they do not erase local initiative. Provinces that grow their economies reap direct fiscal benefits. Equalisation supports balance without extinguishing productivity incentives.
Nigeria’s model, by contrast, centralises oil revenue collection and redistributes according to a politically negotiated formula. The Revenue Mobilisation Allocation and Fiscal Commission recommends revenue allocation formulas, yet political bargaining frequently shapes final outcomes. The derivation principle, currently fixed at 13 percent for oil-producing states under Section 162(2), was designed to address agitation over resource control. While it has reduced tensions in the Niger Delta compared to earlier decades, it has not fundamentally altered subnational productivity patterns across the federation.
The risk of sweeping central directives is not merely administrative; it is structural. They may reinforce the perception, and perhaps the reality, that fiscal authority remains overwhelmingly central.
It is important to distinguish between transparency reform and structural reform. Transparency reform asks whether revenues are properly remitted, audited, and publicly accounted for. Structural reform asks whether the fiscal system aligns incentives with responsibility. Does it encourage states to build internal revenue capacity? Does it reward innovation in taxation and economic diversification? Does it deepen accountability between state governments and citizens?
Nigeria has struggled historically with remittance controversies, from disputes over unremitted oil proceeds to opaque subsidy accounting. In that context, requiring comprehensive remittance into the Federation Account is defensible and arguably overdue. However, administrative centralisation should not be mistaken for institutional strengthening.
The Constitution recognises state fiscal autonomy in other provisions. Section 120 establishes the Consolidated Revenue Fund of a State. Section 121 empowers State Houses of Assembly to pass appropriation laws. These provisions presuppose meaningful fiscal capacity. A federation in which subnational units rely overwhelmingly on centrally distributed oil rents risks reducing constitutional autonomy to procedural formality.
If revenue centralisation is not accompanied by reforms that expand state revenue authority, modernised property taxation, land value capture reforms under the Land Use Act framework, clearer delineation of VAT and consumption tax powers following judicial disputes between federal and state governments, then fiscal asymmetry deepens. Federalism is not sustained by allocations alone; it is sustained by capacity and accountability.
There is also a political dimension that cannot be ignored. Trust in institutions remains fragile. Citizens often perceive revenue debates as elite bargaining rather than service-oriented reform. When an Executive Order mandates oil revenue remittance into the Federation Account, the citizen’s question is straightforward: will this translate into better roads, reliable electricity, functional schools, and accessible healthcare?
If reform is not visibly linked to improved service delivery, it becomes another technocratic rearrangement of fiscal plumbing.
Centralisation is often politically attractive because it consolidates authority. It simplifies command structures. It reduces negotiation complexity. But federations endure not because power is concentrated, but because responsibility is distributed in a manner that aligns authority with accountability.
If Nigeria is to convert this moment into genuine fiscal reform, the conversation must extend beyond remittance mechanics. Derivation should not merely be a percentage allocation; it should be integrated into a broader framework that rewards resource management efficiency and environmental stewardship. States must be incentivised to diversify beyond oil dependence, especially as global energy transitions accelerate.
State tax autonomy requires clearer constitutional and statutory harmonisation to reduce litigation and uncertainty. The federal-state tensions over VAT illustrate how fiscal ambiguity breeds conflict rather than cooperation. Equalisation mechanisms should be refined so that they do not inadvertently penalise states that expand internally generated revenue.
Transparency must also be institutionalised at every tier. The principles embedded in the Fiscal Responsibility Act 2007 should apply with equal vigour to federal, state, and local governments. Oil revenue transparency at the centre achieves little if expenditure opacity persists at subnational levels.
Above all, expenditure must be linked to measurable outcomes. Citizens should be able to trace oil revenue flows through budgets to tangible development indicators. Without that link, fiscal federalism remains abstract.
Nigeria stands at a fiscal crossroads. Oil revenues are no longer predictably buoyant. Price volatility, production constraints, energy transition pressures, and domestic security challenges in oil-producing regions have altered the revenue landscape. The era of effortless oil rent is fading.
In that context, centralising remittance into the Federation Account may be a necessary corrective step, and so applauded. But it cannot be the destination. A capable federation requires more than orderly treasury management. It requires a recalibration of incentives, a strengthening of subnational capacity, and a deepening of democratic accountability.
The Executive Order on oil and gas remittance may be constitutionally defensible. It may even be administratively prudent. But its long-term significance will depend on whether it becomes a platform for structural reform or an endpoint of administrative consolidation.
Does it strengthen the federal structure, or subtly weaken it? Does it empower states to compete, innovate, and grow, or entrench a culture of allocation dependence?
Fiscal federalism is not ultimately about who holds the purse. It is about who bears responsibility and who answers to citizens for outcomes. If states remain structurally dependent on centrally redistributed oil rents, Nigeria’s federation will remain politically tense and economically shallow. If, however, fiscal reform evolves into genuine structural recalibration, encouraging subnational innovation, expanding revenue independence, clarifying constitutional authority, and strengthening accountability, then this moment could mark a turning point.
Nigeria must move from rent distribution to productivity competition; from allocation politics to institutional capability; from central command reflexes to shared responsibility.
Fiscal reform must not become fiscal recentralisation. It must become fiscal empowerment, grounded in constitutional fidelity, comparative insight, and long-term statecraft. Only then will the promise of federalism move from paper to performance.
- business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
mandating full oil revenue remittance into the Federation Account, and what it means for subnational autonomy, productivity, and the future of Nigeria’s federal structure.
When President Bola Ahmed Tinubu recently issued the Presidential Executive Order on the Remittance of Oil and Gas Revenues into the Federation Account, 2026, directing that all oil and gas revenues be paid directly into the Federation Account, the announcement was framed as a reform measure, one aimed at transparency, uniformity, and fiscal discipline. On its surface, the directive appears administratively sound. In a country long troubled by revenue opacity and remittance controversies, few would object to clarity.
Yet beneath that tidy administrative logic lies a deeper constitutional and political economy question: Is this fiscal reform, or fiscal recentralisation?
Nigeria’s constitutional architecture is not unitary. It is federal. And federalism is not merely a descriptive label; it is a structural commitment embedded in the 1999 Constitution of the Federal Republic of Nigeria (as amended). Section 162 establishes the Federation Account into which “all revenues collected by the Government of the Federation” shall be paid, except those expressly exempted. It further provides for distribution among the three tiers of government according to a revenue allocation formula approved by the National Assembly.
On its face, the Executive Order aligns with Section 162. But constitutional compliance is not identical to constitutional coherence. The question is not whether the directive can be defended textually; the question is whether it strengthens the spirit of fiscal federalism.
Federalism presupposes shared sovereignty. Sections 4 and 5 of the Constitution distribute legislative and executive powers between the federal and state governments, while the Second Schedule delineates the Exclusive and Concurrent Lists. States are not administrative appendages of Abuja; they are federating units with defined constitutional responsibilities. Local governments, recognised under Section 7, also form part of this architecture.
Fiscal federalism is the financial expression of that arrangement. In theory, revenue authority and expenditure responsibility should be aligned as closely as possible. If states are constitutionally responsible for primary education, healthcare delivery, intra-state infrastructure, agriculture extension, and security support functions, their fiscal framework must provide meaningful autonomy to discharge those duties.
The challenge in Nigeria has never simply been that revenues are pooled in the Federation Account. The deeper challenge has been the political economy of rent distribution.
Nigeria remains a classic rentier state. Oil revenue is externally generated, centrally collected, and politically redistributed. This structure weakens the accountability bond between subnational governments and their citizens. Governors often look upward to the Federation Account Allocation Committee rather than downward to their tax bases. Internally generated revenue becomes supplementary rather than foundational.
Directing all oil and gas revenues into the Federation Account may indeed improve bookkeeping discipline. It may close loopholes in remittance practices, particularly in light of the restructuring under the Petroleum Industry Act, which commercialised NNPC into NNPC Limited and altered revenue reporting structures. It may reduce discretionary opacity in oil-related inflows. But it does not, by itself, answer the more fundamental question: how do we incentivise subnational productivity? Recentralisation without productivity reform risks reinforcing dependency.
Comparative federations offer perspective. In the United States, the federal government collects income taxes, corporate taxes, and customs duties, but states retain robust taxing authority. Sales taxes, state income taxes in many jurisdictions, and property taxes administered at local levels provide substantial fiscal independence. States do not depend on Washington for monthly survival allocations. Fiscal competition among states creates incentives for economic development and administrative efficiency.
In Canada, a resource-rich federation with provincial diversity, provinces such as Alberta exercise significant control over natural resource revenues within their territories. Equalisation transfers exist to reduce disparities, but they do not erase local initiative. Provinces that grow their economies reap direct fiscal benefits. Equalisation supports balance without extinguishing productivity incentives.
Nigeria’s model, by contrast, centralises oil revenue collection and redistributes according to a politically negotiated formula. The Revenue Mobilisation Allocation and Fiscal Commission recommends revenue allocation formulas, yet political bargaining frequently shapes final outcomes. The derivation principle, currently fixed at 13 percent for oil-producing states under Section 162(2), was designed to address agitation over resource control. While it has reduced tensions in the Niger Delta compared to earlier decades, it has not fundamentally altered subnational productivity patterns across the federation.
The risk of sweeping central directives is not merely administrative; it is structural. They may reinforce the perception, and perhaps the reality, that fiscal authority remains overwhelmingly central.
It is important to distinguish between transparency reform and structural reform. Transparency reform asks whether revenues are properly remitted, audited, and publicly accounted for. Structural reform asks whether the fiscal system aligns incentives with responsibility. Does it encourage states to build internal revenue capacity? Does it reward innovation in taxation and economic diversification? Does it deepen accountability between state governments and citizens?
Nigeria has struggled historically with remittance controversies, from disputes over unremitted oil proceeds to opaque subsidy accounting. In that context, requiring comprehensive remittance into the Federation Account is defensible and arguably overdue. However, administrative centralisation should not be mistaken for institutional strengthening.
The Constitution recognises state fiscal autonomy in other provisions. Section 120 establishes the Consolidated Revenue Fund of a State. Section 121 empowers State Houses of Assembly to pass appropriation laws. These provisions presuppose meaningful fiscal capacity. A federation in which subnational units rely overwhelmingly on centrally distributed oil rents risks reducing constitutional autonomy to procedural formality.
If revenue centralisation is not accompanied by reforms that expand state revenue authority, modernised property taxation, land value capture reforms under the Land Use Act framework, clearer delineation of VAT and consumption tax powers following judicial disputes between federal and state governments, then fiscal asymmetry deepens. Federalism is not sustained by allocations alone; it is sustained by capacity and accountability.
There is also a political dimension that cannot be ignored. Trust in institutions remains fragile. Citizens often perceive revenue debates as elite bargaining rather than service-oriented reform. When an Executive Order mandates oil revenue remittance into the Federation Account, the citizen’s question is straightforward: will this translate into better roads, reliable electricity, functional schools, and accessible healthcare?
If reform is not visibly linked to improved service delivery, it becomes another technocratic rearrangement of fiscal plumbing.
Centralisation is often politically attractive because it consolidates authority. It simplifies command structures. It reduces negotiation complexity. But federations endure not because power is concentrated, but because responsibility is distributed in a manner that aligns authority with accountability.
If Nigeria is to convert this moment into genuine fiscal reform, the conversation must extend beyond remittance mechanics. Derivation should not merely be a percentage allocation; it should be integrated into a broader framework that rewards resource management efficiency and environmental stewardship. States must be incentivised to diversify beyond oil dependence, especially as global energy transitions accelerate.
State tax autonomy requires clearer constitutional and statutory harmonisation to reduce litigation and uncertainty. The federal-state tensions over VAT illustrate how fiscal ambiguity breeds conflict rather than cooperation. Equalisation mechanisms should be refined so that they do not inadvertently penalise states that expand internally generated revenue.
Transparency must also be institutionalised at every tier. The principles embedded in the Fiscal Responsibility Act 2007 should apply with equal vigour to federal, state, and local governments. Oil revenue transparency at the centre achieves little if expenditure opacity persists at subnational levels.
Above all, expenditure must be linked to measurable outcomes. Citizens should be able to trace oil revenue flows through budgets to tangible development indicators. Without that link, fiscal federalism remains abstract.
Nigeria stands at a fiscal crossroads. Oil revenues are no longer predictably buoyant. Price volatility, production constraints, energy transition pressures, and domestic security challenges in oil-producing regions have altered the revenue landscape. The era of effortless oil rent is fading.
In that context, centralising remittance into the Federation Account may be a necessary corrective step, and so applauded. But it cannot be the destination. A capable federation requires more than orderly treasury management. It requires a recalibration of incentives, a strengthening of subnational capacity, and a deepening of democratic accountability.
The Executive Order on oil and gas remittance may be constitutionally defensible. It may even be administratively prudent. But its long-term significance will depend on whether it becomes a platform for structural reform or an endpoint of administrative consolidation.
Does it strengthen the federal structure, or subtly weaken it? Does it empower states to compete, innovate, and grow, or entrench a culture of allocation dependence?
Fiscal federalism is not ultimately about who holds the purse. It is about who bears responsibility and who answers to citizens for outcomes. If states remain structurally dependent on centrally redistributed oil rents, Nigeria’s federation will remain politically tense and economically shallow. If, however, fiscal reform evolves into genuine structural recalibration, encouraging subnational innovation, expanding revenue independence, clarifying constitutional authority, and strengthening accountability, then this moment could mark a turning point.
Nigeria must move from rent distribution to productivity competition; from allocation politics to institutional capability; from central command reflexes to shared responsibility.
Fiscal reform must not become fiscal recentralisation. It must become fiscal empowerment, grounded in constitutional fidelity, comparative insight, and long-term statecraft. Only then will the promise of federalism move from paper to performance.
- business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
John Onyeukwu, is a lawyer and public policy analyst with interdisciplinary expertise in law, governance, and institutional reform. He holds an LL.B (Hons) from Obafemi Awolowo University, an LL.M from the University of Lagos, and dual master’s degrees in Public Policy from the University of York and Central European University. He also earned a Mini-MBA. John has managed development projects on governance, public finance, civic engagement, and service delivery. He can be reached on john@apexlegal.com.ng
