By Olisa Agbakoba SAN & Collins Okeke
Most Nigerians go about their daily lives without knowing that Nigeria, like an individual with a personal bank account, has a special account called the Federation Account, a constitutional account into which every revenue collected by the federation is supposed to be deposited before being shared among the federal, state, and local governments.
It is the financial heartbeat of the Nigerian federation. Yet few citizens know it exists, fewer still understand how it works, and almost no one is held to account when it fails.
And it is failing spectacularly.
What the Constitution Says
Section 162(1) of the Constitution of the Federal Republic of Nigeria, 1999 provides: “The Federation shall maintain a special account to be called ‘the Federation Account’ into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the Armed Forces of the Federation, the Nigeria Police Force, the Ministry or department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.”
The provision states its intent plainly. Subject to narrow and defined exceptions, namely personal income tax proceeds from the armed forces, the police, the foreign affairs ministry, and FCT residents, all revenues collected by the federation must flow into one central account. Section 162(3) then requires those funds to be distributed among the three tiers of government according to a formula prescribed by the National Assembly. But intent without architecture is not design; it is aspiration. And aspiration, as Nigeria has discovered over twenty-five years, is not enough.
Where is the account?
Here is a question that should embarrass us: the Constitution does not actually say where the Federation Account should be kept. It establishes the account but says nothing about which institution should hold it, on what terms, or with what transparency obligations. This is a significant constitutional gap.
In practice, the Federation Account is domiciled at the Central Bank of Nigeria, CBN, which serves as the government’s banker under the CBN Act, 2007. The Office of the Accountant-General of the Federation, OAGF, manages its books, while the Federation Account Allocation Committee, FAAC, meets monthly to share out whatever has arrived.
The question of where the Federation Account should be domiciled is ultimately a constitutional one, not a reflection on the CBN’s institutional competence. The CBN has served creditably as the government’s banker, and its role in receiving and processing federation revenues has been indispensable.
However, the absence of a clear legal framework governing that custodianship creates ambiguities that serve neither the CBN nor the federation well. A proper custody framework, clearly specified in law, would strengthen institutional boundaries, protect the CBN’s independence as a monetary authority, and ensure that its fiscal agency role does not expose it to the kind of quasi-fiscal pressures, including Ways and Means financing, that have historically complicated its primary mandate of price stability. Clarifying the law is not a criticism of the CBN. It is a protection for it.
The TSA: A well-intentioned reform that did not go far enough
Before examining the full scale of the problem, it is important to acknowledge a significant prior reform effort. During her tenure as Finance Minister, Dr. Ngozi Okonjo-Iweala introduced the Treasury Single Account, TSA, as a mechanism to consolidate government revenues and reduce fragmentation across multiple banking relationships.
It was a well-intentioned and partially effective intervention. But the TSA is not Section 162. It was created by executive directive, not by statute, and it does not carry the constitutional weight that Section 162 demands. Revenue leakages continued under the TSA framework, and by current estimates Nigeria is losing up to twenty trillion naira annually in revenues that should reach the Federation Account but never do.
The TSA addressed symptoms; it did not cure the constitutional disease. What Nigeria needs is not a better administrative workaround but full implementation of the constitutional obligation itself.
The scale of the problem
Nigeria is not a poor country. Between 2023 and 2024, federation revenues rose from N16.8 trillion to an estimated N31.9 trillion, with 2025 figures pointing to continued growth, according to the World Bank’s Nigeria Development Update. The numbers are staggering.
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Yet the scale of what does not arrive is equally staggering. The World Bank’s April 2026 Nigeria Development Update reported that in 2025 alone, more than 39 per cent of gross federation revenues, amounting to approximately N14.94 trillion, were consumed by deductions before funds could reach the Federation Account for distribution among the three tiers of government. While roads crumble, hospitals lack equipment, and schools fall apart, nearly two-fifths of what Nigeria generates is absorbed before it can be spent on Nigerians.
This is not a new problem. In 2014, then-CBN Governor Lamido Sanusi warned that between $10.8 billion and $20 billion in oil revenues had not been remitted by NNPC over the preceding three years. The problem has since deepened. A FAAC investigation is currently ongoing into allegations that NNPCL under-remitted $42.37 billion, equivalent to approximately N12.91 trillion, to the Federation Account between 2011 and 2017. In 2024, NNPCL, Nigeria’s largest single revenue generator, remitted only N600 billion of the N1.1 trillion due to the Federation Account, with the remaining N500 billion withheld by NNPCL reportedly to offset legacy arrears.
Beyond oil, the leakages are everywhere. A House of Representatives investigation in 2023 found that over N8.7 trillion had passed through the Treasury Single Account gateway, but that agencies had proliferated unauthorised sub-accounts, creating what the OAGF itself described as “significant revenue leakages.”
The Minister of Finance admitted in 2024 that until August of that year, the federal government could not fully see its own balance sheet. Federal Courts, Universities, Hospitals collect revenues running into billions annually, with no transparent evidence that these revenues are remitted as the Constitution requires.
Why the money does not arrive
The reasons are structural, not incidental. The Constitution establishes the Federation Account but critically fails to operationalise it. There is no constitutionally designated custodian, no specified remittance timeline, no designated auditor, and no prescribed penalty for non-compliance. This silence has allowed decades of administrative deviation to calcify into normalcy.
Revenue collection is further fragmented across dozens of agencies, including the Nigeria Revenue Service, NRS, the Nigeria Customs Service, NCS, the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, the Nigerian Communications Commission, NCC, the Securities and Exchange Commission, SEC, the Nigerian Ports Authority, NPA, the courts, universities, and hospitals, each with different supervisors, different accounting systems, and different cultures of accountability. No single institution has real-time consolidated visibility of what is actually flowing in.
The Nigerian National Petroleum Company Limited, NNPCL, compounds the problem by operating with insufficient transparency. Under the Petroleum Industry Act, 2021, the Nigerian National Petroleum Company Limited retained as much as 60 per cent of profit oil and gas from Production Sharing Contracts before any remittance to the Federation Account, comprising a 30 per cent management fee and a further 30 per cent allocated to the Frontier Exploration Fund.
President Tinubu’s Executive Order of February 13, 2026 has since halted these deductions and directed that such revenues be paid directly into the Federation Account. However, the structural problem of pre-remittance appropriation persists in another form.
The Nigerian National Petroleum Company Limited has pledged a combined total of approximately 213,000 barrels per day of Nigeria’s crude oil under multiple crude-for-loan agreements, including Project Gazelle, a $3.3 billion forward sale facility with the African Export-Import Bank (Afreximbank) under which 90,000 barrels per day alone are committed to debt repayment until 2029.
These are major fiscal commitments made in the name of the federation, most without National Assembly authorisation and with limited public accounting.
Underlying all of this is impunity. No senior government official has ever been prosecuted specifically for failing to remit revenues to the Federation Account. Without consequences, the culture of retention persists.
The borrowing paradox
The direct consequence of this structural failure is one of the most painful paradoxes in Nigerian public life: a country that generates extraordinary revenues simultaneously carries crushing debt. Nigeria’s total public debt rose to N159.27 trillion at the end of 2025, and the IMF projects the country’s debt-to-GDP ratio will reach 33.1 percent in 2027, coinciding with a critical election cycle.
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Debt service consumed 78 percent of federal revenue in 2023 and, despite improvement, still consumed 69 per cent in 2024, remaining far above the 30 to 40 per cent benchmark recommended by the World Bank and IMF for developing economies. The country’s infrastructure deficit is estimated at $2.3 trillion between 2020 and 2043, requiring approximately $100 billion in annual investment. Every naira diverted from the Federation Account makes that deficit wider and that debt deeper.
What needs to be done
The President of Nigeria has both the constitutional authority and the moral obligation to act. Section 5(1) of the Constitution vests executive power in the President, including responsibility for implementing all laws. Section 162 creates a constitutional obligation that revenues be remitted, and the executive is the primary instrument of that obligation’s enforcement.
Our proposal is that the President should issue a comprehensive Executive Order on Federation Account Integrity and Revenue Transparency, a far broader instrument than the narrow petroleum revenue directive issued in early 2026.
The Order should mandate that all revenues collected by any federal ministry, agency, government-owned enterprise, federal court, or federal institution be remitted in full to the Federation Account within 24 hours of collection, with no deductions permitted before remittance. It should require NNPCL to publish cargo-by-cargo crude oil lifting data and remittance schedules on a monthly basis. It should establish a publicly accessible, real-time Federation Account Revenue Dashboard disclosing what every collecting institution billed, collected, and remitted.
Finally, it should make accounting officers personally liable for non-remittance within prescribed timelines, including by referral to the Economic and Financial Crimes Commission, EFCC, for prosecution.
Alongside the Executive Order, Nigeria needs a Federation Account Administration Act, a dedicated statute that does what the Constitution left undone: it should specify the banking custodian, set remittance timelines, define permissible deductions, establish criminal penalties, and create a transparent audit architecture covering every revenue stream, including Federal courts, hospitals, Universities etc.
In the longer term, Section 162(1) of the Constitution should be amended to insert a new subsection 162(1A) incorporating mandatory reporting and audit obligations and removing the reliance on executive discretion that has allowed the Federation Account to haemorrhage for twenty-five years.
The proposed amendment reads as follows: “All revenues accruing to the Federation shall be paid into the Federation Account in gross. No deductions, costs, charges, or offsets of any nature shall be made prior to such payment.
All costs and expenditures relating to the generation of such revenues shall be appropriated by the National Assembly and disbursed only after remittance into the Federation Account has been made. No executive instrument, administrative direction, or government policy shall establish or maintain any account as a substitute for, or as the equivalent of, the Federation Account established by this section.”
Conclusion
Nigeria is not poor. Nigeria is structurally leaking. The Federation Account, the constitutional vessel into which all national revenue is supposed to flow, has been broken for decades, and the Nigerian people have paid the price in debt, decay, and deferred development. The tools to fix it are available: executive orders, legislation, technology, and the political will to hold the powerful accountable.
This must also become an election issue. Every presidential candidate seeking the mandate of Nigerians in 2027 ought to be required to state clearly and specifically what they intend to do about the Federation Account. Not platitudes about fighting corruption or growing the economy, but concrete answers: Will you issue an Executive Order on revenue remittance? Will you push for a Federation Account Administration Act? Will you prosecute officials who divert federation revenues? Will you publish a real-time revenue dashboard? Nigerians are entitled to those answers before they vote, not after. Any candidate who cannot answer these questions does not understand the country’s fiscal crisis. Any candidate who refuses to answer them is telling you something important about their intentions.
The question is not whether Nigeria can afford to fix the Federation Account. The question is whether Nigeria can afford not to.
