The federal government is contemplating implementing liquidity controls, including staggered revenue distributions and the creation of fiscal buffers, to mitigate potential inflationary pressures arising from increased public-sector liquidity. This move comes as sweeping oil and tax reforms are expected to significantly boost inflows into the Federation Account.

Speaking at the recent Federation Account Allocation Committee (FAAC) meeting in Abuja, Doris Uzoka-Anite, the minister of state for finance, highlighted the anticipated impact of structural changes to petroleum revenue management and the implementation of new tax measures. These changes, she noted, are projected to substantially strengthen monthly allocations to federal, state, and local governments.

The reforms include a presidential executive order issued on February 13, 2026, which mandates the full remittance of oil and gas revenues into the Federation Account. This order also suspends certain management fees and allocations previously deducted at source and directs that gas flare penalties be paid directly into the common pool shared by the three tiers of government. Furthermore, tax reforms, which took full effect from January 2026, are broadening the tax base and improving compliance, according to the minister.

These measures are collectively expected to increase gross monthly inflows and boost FAAC distributable income in a sustained manner. Oil-producing states could see higher 13% derivation transfers, and overall cash-flow predictability across tiers of government is likely to improve. Retrospective audits of funds and past deductions may also yield one-off recoveries.

Uzoka-Anite cautioned about the potential macroeconomic consequences of a sudden surge in allocations. “Experience shows that when revenues rise sharply and are distributed fully and immediately, large liquidity injections can increase inflationary pressures, complicate monetary management, and reduce the real purchasing power of allocations,” she stated.

Nigeria is currently navigating a period of elevated inflation and exchange-rate volatility. Policymakers are focused on stabilizing prices while sustaining economic growth. A significant increase in fiscal injections, particularly if directed towards recurrent spending, could heighten aggregate demand, put pressure on the currency, and complicate the central bank’s liquidity management operations.

To mitigate these risks, the minister proposed a structured framework for managing higher inflows. One option under consideration is the phased disbursement of any one-off recoveries arising from retrospective audits, rather than distributing them in a single tranche. Additionally, a portion of incremental inflows could be warehoused in a stabilisation buffer to smooth their impact on liquidity. The government is also weighing a strengthened stabilisation mechanism to channel a portion of higher inflows into a buffer that can be drawn upon during weaker revenue months, reducing pro-cyclical spending. Closer coordination with the central bank would aim to align fiscal injections with open market operations and other liquidity management tools.

“We should consider staggered FAAC distribution rather than a single bulk injection,” she said, adding that fiscal and monetary authorities “must move in sync.”

These revenue reforms represent a shift towards a gross remittance model in petroleum income management, reinforcing the principle that all revenues accruing to the federation belong first in the Federation Account. For all tiers of government, however, the crucial test will be managing the anticipated windfall without reigniting price pressures — balancing the political appeal of higher allocations with the economic imperative of stability.

Uzoka-Anite urged federal ministries and state governments to prioritize capital expenditure and productive investment over recurrent outlays, arguing that infrastructure, agriculture, and energy spending would expand supply capacity and help dampen inflationary pressures over time. She also pledged enhanced transparency, including monthly revenue dashboards and reconciliation reporting to track incremental inflows from tax and oil reforms.

Customs targets N9trn revenue in 2026 after a record year. The broader objective, she said, is to ensure that higher revenues translate into macroeconomic stability rather than fiscal complacency. “In simple terms, 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 concluded.