FG Mulls Warehousing Oil Gains To Curb Liquidity Surge

KEY POINTS

• The Federal Government is considering “warehousing” incremental oil revenue gains in a stabilization buffer to prevent a sudden liquidity surge.
• The move follows a landmark Executive Order by President Tinubu mandating direct remittance of oil revenues, which could inject up to ₦14.7 trillion annually into the Federation Account.
• Finance officials warn that immediate, bulk distribution of these gains could trigger inflation, erode the value of allocations, and complicate monetary policy.

MAIN STORY

The Federal Government is weighing a strategic proposal to “warehouse” significant portions of new oil and gas revenue gains to protect the economy from a massive liquidity shock. This plan, disclosed during the recent Federation Account Allocation Committee (FAAC) meeting, aims to manage the anticipated windfall from President Bola Tinubu’s Executive Order, signed on February 13, 2026. The order effectively ends the practice of the NNPCL retaining 30% management fees and Frontier Exploration Funds, redirecting those trillions of Naira directly into the common pool shared by the three tiers of government.

Minister of State for Finance, Dr. Doris Uzoka-Anite, cautioned that while the revenue outlook is strengthening due to these reforms and improved tax compliance, “distributing these gains fully and immediately” poses a risk. Large injections of cash could drive up aggregate demand, exert pressure on the Naira, and heighten inflationary risks. To mitigate this, the government is proposing a structured framework that includes the phased disbursement of one-off recoveries and the use of fiscal buffers to smooth out the impact on money supply.

The “Federation-first” model marks a shift away from the retention-based architecture established by the 2021 Petroleum Industry Act. By warehousing incremental inflows in a stabilization window, the government hopes to create a hedge against future revenue shortfalls while ensuring that the current surge in liquidity does not derail macroeconomic stability. This approach would also involve tighter coordination with the Central Bank to align fiscal injections with national liquidity management tools.

WHAT’S BEING SAID

• “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,” stated Minister of State for Finance, Dr. Doris Uzoka-Anite.
• The Minister proposed that retrospective recoveries from audits should face “staggered distribution rather than a single bulk injection” to safeguard the economy.
• Finance officials emphasized that the success of the reform will be measured by “stability, discipline and responsible stewardship” rather than just higher monthly checks for states.

WHAT’S NEXT

• FAAC members will deliberate on the specific thresholds for the proposed stabilization buffer and the timeline for phased disbursements.
• The government plans to launch monthly transparency dashboards to track incremental inflows and show how “warehoused” funds are being managed.
• Stakeholders expect further legislative alignment to formalize these interim executive measures within the existing petroleum and fiscal laws.

BOTTOM LINE

The Bottom Line is that the Federal Government is choosing caution over a “spending spree” by mulling a warehousing strategy. While the new oil revenue flows are a significant fiscal victory, the move to buffer these gains highlights a growing recognition that unmanaged liquidity could easily morph into a self-defeating inflationary spiral.