Federal Gov’t Mulls Warehousing Oil Revenue Gains To Prevent Liquidity Surge

The federal government is considering warehousing incremental oil revenue gains in a stabilisation buffer to prevent a sudden liquidity surge in the economy.

Minister of State for Finance and Chairman of the Federation Account Allocation Committee (FAAC), Doris Uzoka-Anite disclosed this while addressing FAAC members on the Presidential Executive Order on oil and gas revenue management in Abuja on Friday.

The move is part of efforts to manage the expected outcome of the recent executive order by President Bola Tinubu on direct remittance of revenues to the Federation account.

At the core of the order is the suspension of NNPCL’s collection of management fees, frontier exploration fees and gas flare penalties. The move effectively halts deductions that previously reduced funds accruing to the Federation Account.

The minister said the recent tax reforms and the new Executive Order are expected to materially strengthen Federation revenues and boost FAAC distributable income.

According to her, broader tax reforms are expanding the tax base, improving compliance and enhancing administrative efficiency. In addition, the Executive Order is reinforcing revenue discipline in the oil and gas sector and reducing leakages.

The Order suspends the 30 per cent allocation to the Frontier Exploration Fund. It also suspends the 30 per cent management fee on profit oil and profit gas payable to the Nigerian National Petroleum Company Limited.

It further directs that gas flare penalties be paid into the Federation Account and mandates full remittance of petroleum revenues without unconstitutional deductions.

The minister described the shift as a move from a retention-based oil revenue model to a gross remittance, Federation-first framework.

Uzoka-Anite said the reforms would result in higher monthly gross inflows into the Federation Account, increased allocations to federal, state and local governments, and higher 13 per cent derivation transfers to oil-producing states.

However, she warned that sharp increases in distributable revenues, if fully and immediately injected into the system, could raise inflationary pressures and complicate monetary management.

“When too much liquidity enters the system at once, prices can rise in a way that erodes the value of the very allocations we are distributing,” Uzoka-Anite said.

To mitigate that risk, the minister proposed a structured mechanism to responsibly manage higher inflows.

The minister said where retrospective recoveries arise from audits of the Frontier Exploration Fund, the Midstream and Downstream Gas Infrastructure Fund and NNPC management fee deductions, FAAC should consider staggered distribution rather than a single bulk injection.

A portion of such recoveries, he added, could be temporarily warehoused in a stabilization buffer to smooth the liquidity impact.

He also urged FAAC to consider strengthening the Excess Crude or stabilisation buffer mechanism by channelling part of incremental inflows into a fiscal stabilisation window.

Such buffers, she said, could be used to offset revenue shortfalls in weaker months and reduce procyclicality in spending.

The minister stressed the need for stronger coordination with the Central Bank to align fiscal injections with liquidity management tools and avoid destabilising money supply expansion.

She encouraged states and federal ministries, departments and agencies to prioritise capital expenditure over recurrent expansion and to avoid unsustainable wage or consumption spikes.

Uzoka-Anite said productive investment in infrastructure, agriculture and energy would expand supply capacity and mitigate inflationary risks.

The minister added that improved revenue performance must be matched by improved fiscal coordination, noting that FAAC’s responsibilities extend beyond distribution to safeguard macroeconomic stability and long-term growth.

She said the success of the Executive Order would be measured not only by higher monthly allocations but by stability, discipline and responsible stewardship across all tiers of government.