Deductions from Nigeria’s Federation Account declined by N1.7 trillion in the first half of 2026 following changes to the retention of certain oil revenues by the Nigerian National Petroleum Company Limited (NNPCL), according to the World Bank.
The bank disclosed the development in its Nigeria Development Update report, stating that total deductions fell from N10.1 trillion in the first half of 2025 to N8.4 trillion during the corresponding period of 2026. The decline represented a year-on-year reduction of 16.8 per cent.
The deductions also decreased as a proportion of the economy, falling from 4.6 per cent of gross domestic product to 3.4 per cent over the period.
The World Bank attributed the reduction partly to Executive Order 9 of 2026, signed by President Bola Tinubu on February 13. The order ended NNPCL’s deductions for a 30 per cent management fee and the Frontier Exploration Fund from profit oil and profit gas under specified petroleum contracts.
It also redirected revenue from gas-flaring penalties to the Federation Account rather than the Midstream and Downstream Gas Infrastructure Fund.
The changes affected how much revenue was available for distribution among the federal, state and local governments. According to the report, distributed Federation Account revenues rose from N7.6 trillion in the first half of 2025 to N10.5 trillion in the first half of 2026.
That represented an increase of N2.9 trillion, or 38.2 per cent, over the period.
Under the Petroleum Industry Act 2021, NNPCL had been entitled to a 30 per cent management fee on profit oil and profit gas, alongside a similar allocation to the Frontier Exploration Fund. The Tinubu administration argued that these arrangements reduced the amount of petroleum revenue available to the wider federation.
The executive order was therefore intended to change the treatment of the specified revenues and increase the funds available for distribution through the Federation Account.
However, the World Bank report indicated that the reduction in deductions did not translate into a comparable increase in gross revenue relative to the size of the economy.
Gross Federation Account revenues increased from N17.7 trillion in the first half of 2025 to N18.9 trillion in the first half of 2026. Despite the nominal increase, revenue as a share of GDP declined from 8.0 per cent to 7.6 per cent.
The figures highlight the distinction between reducing deductions and expanding the underlying revenue base. While the new arrangements increased the share of funds distributed through the Federation Account, the broader revenue-to-GDP figures suggest that Nigeria continues to face challenges in raising public revenue relative to economic output.
The report’s findings provide a basis for assessing the fiscal impact of the policy change, including its implications for revenue distribution and the financing responsibilities of different levels of government.
Deborah Adeyefa
