…Agbakoba, others show the way
Nigeria's latest executive order mandating the direct remittance of oil and gas revenues to the federation account has reignited the long-running debate over fiscal sovereignty, who actually controls the country's most important economic resource, and who ultimately benefits from it.
For decades, Africa's largest oil producer has grappled with a paradox: vast petroleum wealth, yet chronic fiscal deficits, rising public debt and persistent revenue leakages.
President Bola Ahmed Tinubu's directive, which has been hailed by legal and policy advocates as a decisive intervention, has triggered a broader conversation about how Nigeria can regain full control over its oil revenues not only administratively, but structurally.
At the center of that conversation is a fundamental question: Can fiscal sovereignty be restored by executive action alone, or will Nigeria need to undertake deep institutional and legal reforms?
Also read: Tinubu's executive order and the test of fiscal transparency
Constitutional basis of fiscal sovereignty
In the Nigerian context, fiscal sovereignty begins with the Constitution. Section 162 of the 1999 Constitution states that all revenues collected by the Federation, including oil and gas income, must be paid into the Federation Account and shared among the federal, state and local governments.
Yet, over time, statutory mechanisms, contractual arrangements, and institutional practices have weakened this constitutional principle.
Olisa Agbakoba, a senior advocate of Nigeria and former president of the Nigerian Bar Association, argues that the executive order is a turning point in reversing that erosion.
In a presentation to the Implementation Committee chaired by the Minister of Finance, Wale Edun, Agbakoba described the order as “a decisive step towards restoring the constitutional revenue rights of the Federal, State and Local Governments”.
He said Nigeria's fiscal sovereignty has been “effectively eroded” through cuts and layers of contractual arrangements that divert revenues before they reach the federation account.
NNPC Dilemma: Commercial Entity or Fiscal Gatekeeper?
At the center of the fiscal sovereignty debate is the role of the Nigerian National Petroleum Company Limited, which historically operated as both a commercial oil company and quasi-government revenue manager.
Under the Petroleum Industry Act (PIA), NNPCL retains a significant portion of oil revenues through management fees, retained earnings and special purpose funds such as the Frontier Exploration Fund.
Agbakoba argues that this dual role created structural conflict that weakened Nigeria's financial position.
He recommended its privatization and complete withdrawal of the government from direct commercial involvement in oil and gas operations, saying, “NNPC should be merely an oil company with no statutory functions.”
This approach is in line with long-standing recommendations of multilateral institutions such as the World Bank and the International Monetary Fund, which have repeatedly urged Nigeria to separate regulatory, financial and commercial roles in the petroleum sector.
“By this Executive Order NNPCL is now ordered to move forward: go and be the commercial entity that PIA says you are. Stop breastfeeding with your mother's milk. You are now an adult. Go and do it for yourself,” said energy expert Nick Agule during a recent appearance on Arise News.
The problem with production sharing and joint venture structures
Beyond institutional reform, experts say Nigeria must confront the structural economics of its oil contracts.
Production sharing contracts (PSC) and joint venture (JV) arrangements with international oil companies (IOCs) were originally designed to attract foreign investment and technical expertise. But critics argue that these agreements often favor foreign operators, allowing extensive cost recovery before government revenues are calculated.
Agbakoba said redirecting payments to the federation account is important, but it does not address the deeper issue.
“The fundamental problem is not just where payments are made, but the underlying contractual frameworks that determine how much will be paid,” he said.
Under the PSC arrangement, oil companies recover exploration and production costs first, reducing the net revenue to the government.
The most immediate impact of the Executive Order lies in mandating direct remittance of oil revenues to the Federation Account, eliminating intermediary cuts and special purpose funds.
This change could significantly improve government liquidity, reduce borrowing pressure and enhance fiscal planning.
Nigeria currently spends a large portion of its revenue on debt servicing, leaving limited fiscal space for infrastructure, health care and education. Improving oil revenue receipts could help alleviate those constraints.
Agbakoba's call for privatization of NNPCL reflects a broader global trend towards commercialization of national oil companies.
Countries such as Norway and Brazil transformed their national oil companies, Equinor and Petrobras, into commercially run entities with fewer fiscal control functions.
strengthening regulatory institutions
Experts agree that fiscal sovereignty ultimately depends on strong regulatory institutions.
Agencies such as the Nigerian Upstream Petroleum Regulatory Commission and the Nigeria Revenue Service play a vital role in ensuring accurate revenue assessment and collection.
Improving regulatory capacity could help Nigeria: accurately monitor production volumes, prevent cost inflation by operators, enforce tax and royalty obligations, and ensure proper remittance of revenues.
Transparency initiatives such as the Nigeria Extractive Industries Transparency Initiative (NEITI) have repeatedly exposed revenue leakages and reporting discrepancies.
Addressing these institutional weaknesses is essential for long-term fiscal sovereignty.
Balancing sovereignty with investor confidence
Nigeria must also carefully manage its relationships with international oil companies, which provide capital and technical expertise. Abrupt termination of existing contracts could lead to legal disputes and discourage investment.
“What are we telling investors? What are we signaling out there that, with just an executive order, you can repeal the law of the land?” asked Festus Osifo, President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASAN), who protested against the President's decision.
“If that happens, the international community will lose confidence in PIA. Investors will lose confidence in PIA. Tomorrow, they will think that any provision protecting their investments can be revoked by executive order. The signal is troubling.”
To resolve this, Agbakoba proposed a phased transition approach that respects contractual obligations while gradually increasing national control.
Such a strategy could allow Nigeria to renegotiate terms, improve revenue sharing, and strengthen fiscal sovereignty without destabilizing the investment climate.
Also read: Why I issued executive order on NNPC finances – Tinubu
The way forward: beyond executive action
The Executive Order represents an important first step, but regaining fiscal sovereignty requires continued structural reforms.
Key priorities include: ensuring full implementation of direct revenue remittances, reviewing and amending the financial provisions of the Petroleum Industry Act, strengthening regulatory and fiscal oversight institutions, improving transparency in oil revenue management, clarifying the commercial role of NNPCL, and reconsidering or restructuring the oil contract framework where necessary.
Nigeria's oil wealth remains its most important financial asset. Ensuring that funds fully serve national development will depend on the country's ability to align its institutional structures, legal framework and fiscal policies with its constitutional principles.
The executive order may have reopened the door. Whether Nigeria fully regains its fiscal sovereignty will depend on the reforms that follow.
