There are old arguments that Nigeria never really solves, they simply lie there beneath the noise, waiting for the right mix of tension and economic pressure to push them back to the surface. By early 2025 the argument over how oil money is shared had become one of those returning ghosts. For years people said the revenue sharing system was outdated, uneven, honestly unfair to some states and too protective of others, but nothing changed because the country settled into the familiar rhythm of complaining without moving. Then 2025 arrived with new fiscal struggles, sharp shifts in state responsibilities, and fresh voices from oil producing communities, and suddenly the old debate found new teeth.
Every time the national allocation sheet is released, Nigerians read it the way people read a weather report they cannot control. The centre takes a large gulp, states fight over the balance, local governments feel abandoned, and somewhere in between the oil producing regions say the country is not being truthful about what comes from their land.
The Petroleum Industry Act that was supposed to calm some of this heat only added a different kind of argument, especially from host communities who believe the three percent allocation granted to them is an insult rather than a solution. It was almost predictable that 2025 would carry this quarrel forward, but the pace and intensity surprised everyone, including the political class that thought the matter would remain in the background.
Three decades have passed since Nigeria last carried out a full overhaul of the revenue sharing formula. The world changed. The population exploded. State responsibilities multiplied. The structure of the economy transformed in waves. Yet the system for sharing national income, especially from crude oil, still carried the shape of a far older Nigeria.
That alone gave the debate a new kind of urgency, the kind that follows a country when the numbers no longer match the reality on the ground.
This article goes deep into the reasons behind the renewed scrutiny. It draws from real 2025 events, confirmed statements, and measurable data. It takes the street human route rather than the rigid analytical path because the story of Nigeria’s revenue sharing is not the kind you explain with dry formulas.
It is a story of ownership and anger, of geography and power, of oil producing communities and federal authority, of state governors who swear they are owed more, and a centre that insists it carries the burden of national maintenance. It is a story as old as oil itself, but 2025 added new wrinkles and new characters, turning familiar arguments into a fresh national confrontation.
THE BEGINNING OF 2025: Tension rising quietly but clearly
The first days of 2025 were filled with all the usual political noise. New year speeches from leaders, economic forecasts from analysts, and a shaky optimism from citizens who hoped the new calendar might bring some relief. Beneath that public chatter, a different tension brewed. Oil revenues were moving up and down in unpredictable ways, crude production numbers still struggled below projections, and the federal allocation sheets showed signs of strain.
People in Abuja knew the numbers looked strange. State governors whispered privately that the formula simply could not work for the responsibilities they now carried. Several constitutional amendments had shifted new duties to states, including energy regulation in some contexts, parts of transportation, and corrections administration. Yet their share of national revenue still followed the old formula crafted in the early 1990s when many of these duties belonged to the federal centre.
It was not surprising that oil producing states were among the loudest voices demanding a rethink. They pointed to the 13 percent derivation payment guaranteed by the Constitution, saying the amount they receive may look large in raw figures but shrinks fast when matched against oil related damages, environmental cleanup, policing of pipelines, and community pressures. A deeper complaint came from states like Enugu, which was officially recognised by RMAFC in 2022 as an oil producing state but stated publicly in 2025 that it had not begun receiving its derivation share. That statement felt like a soft explosion because it revealed there were deeper inconsistencies in how the formula was being triggered.
At the grassroots level host communities were also rising in voice. One group representing Christian oil producing communities argued that the three percent allocation granted to host communities under the Petroleum Industry Act was far too small for the scale of extraction and the decades of environmental burden they carry. Their argument was clear and emotional. They called the three percent figure unjust and said it denied communities their rightful share of oil wealth. For the first time since the PIA became law in 2021, this type of organised pushback began gaining national attention.
These early tensions shaped the rest of 2025. They created the emotional and political environment that made the RMAFC review not just necessary but inevitable.
THE FORMULA EVERYBODY TALKS ABOUT BUT FEW CAN EXPLAIN
The Nigerian revenue sharing formula is one of the most discussed and least understood parts of the country’s economic structure. People talk about federal share, state share, local government share, derivation, special funds, federation account, and PIA revenues, but very few can trace the exact lines that connect these numbers. Part of this confusion comes from the fact that the formula itself is a blend of constitutional rules, legislative additions, court rulings, emergency adjustments, and political negotiations.
Oil money enters the Federation Account. From there the Constitution mandates a certain pattern of sharing between the three tiers of government. Then the derivation principle kicks in, guaranteeing that oil producing states receive not less than 13 percent of revenue derived from their land. Apart from these, RMAFC designs the broader formula, and this design has not been overhauled since around 1992. That alone explains why the formula feels frozen in time while the country moves forward with speed.
Nigeria of 1992 is not the Nigeria of 2025. The population structure is different. State responsibilities have expanded. Infrastructural needs have multiplied. Environmental responsibilities have widened. The demands on host communities have increased. Oil production patterns have shifted dramatically. Offshore fields now dominate output, meaning that the physical logic that shaped the concept of producing states is less relevant in physical terms, but the political logic remains. In short, the formula tries to serve a country that no longer exists in the same form.
The result is frustration. And in a country already under economic strain, frustration turns quickly into national debate.
RMAFC STEPS IN: And Nigeria suddenly pays attention
When the Revenue Mobilisation Allocation and Fiscal Commission announced in early 2025 that it was officially reviewing the revenue sharing formula, the news did not land like a dull administrative update. It felt like a reopening of an old wound. The chairman, Mohammed Bello Shehu, made it clear that the current structure was outdated. He said the formula no longer reflects Nigeria’s responsibilities, population shifts, or governance realities. For those who had followed the struggle closely, that statement was one of the most honest admissions made on the matter in years.
The commission began verifying disputed oil wells across several Niger Delta states, a move that immediately caused nervousness among politicians who knew that any change in well classification could shift billions from one state to another. Some states have argued for years that certain wells belong to them, not their neighbours. The verification process in 2025 reopened these disputes and reminded Nigerians that oil geography is as political as it is geological.
Host community agitation amplified the pressure even more. Groups demanded a revision of the three percent PIA allocation. They insisted that this percentage is incapable of addressing the environmental and social damage oil extraction has caused across decades. This argument gained new force in 2025 as data on spills, cleanup delays, pipeline sabotage, and infrastructure decay resurfaced in public debate.
Put all this together and you see why the RMAFC review became a focal point. It was not a silent bureaucratic process. It was a political storm waiting to mature.
The States That Feel Shortchanged and the emotions behind their claims
Several state governors spent the first half of 2025 repeatedly complaining that their responsibilities had grown but their revenue share had not. Some states argued that the federal government held too much power and too much of the money, while others insisted that local governments had become financially invisible because the formula does not give them meaningful autonomy.
Oil producing states, on their part, said the 13 percent derivation was too small to match what extraction has taken from their environment. A few pointed out that as offshore drilling increases, the concept of territory becomes blurred. Oil produced offshore does not lie cleanly within a single state boundary, yet the derivation allocations still follow the old system. This makes some states feel that they have been pushed out of the benefits while still dealing with the environmental and social burden of oil activities.
Enugu’s situation added fuel to the fire. Recognised in 2022 but still not receiving derivation payments by 2025, the state argued that being classified as oil producing means nothing if the benefits do not follow. Other states watched closely because Enugu’s case could influence how future claims are treated.
Nigeria’s oil producing communities also raised a deeper emotional argument. They said the country counts on their land to survive, yet their schools, hospitals, roads, coastlines, and water bodies remain damaged. The PIA host community fund was supposed to change that, but with only three percent allocated, many say it barely scratches the surface of centuries of extraction.
THE RISING NUMBERS THAT PROVE THE PRESSURE
Nigeria recorded a massive rise in derivation payouts in early 2025. Oil producing states reportedly received around six hundred and twenty billion naira during the first five months of the year under the thirteen percent derivation rule, at first glance that number looks huge.
But when you place it beside the cost of cleanup, security, community pressure, environmental rehabilitation, and infrastructure demands, the number shrinks. States receiving those funds still insist they carry enormous burden relative to what they get.
Meanwhile the federal government has its own argument. It manages national security, federal roads, interstate infrastructure, defence, customs, immigration, and national debt servicing. All these responsibilities consume more money than the current federal share comfortably provides. That is why the federal centre resists any formula that cuts its percentage, States push for more.
The centre pushes back, Host communities push harder. Everybody feels entitled to more than they currently get.
This growing competition for oil revenue pushed the country toward a new national confrontation over how the formula should function.
WHY THE FORMULA FEELS UNFAIR TO DIFFERENT GROUPS FOR DIFFERENT REASONS
Different groups believe the revenue sharing system hurts them, but the reasons vary.
Oil producing states say the formula does not compensate for environmental damage. Non oil producing states say the centre has not created new revenue streams, so they depend too heavily on oil and feel punished for not having the natural resources of others. Host communities say they carry the weight but benefit the least.
The federal government says it shoulders the national burden and therefore needs a strong share. Local governments say they are forgotten even though they handle water sanitation, markets, rural roads, community health and many direct services citizens rely on daily.
All these arguments are valid in different ways. The country has never fully resolved them because any change in the formula shifts billions of naira from one tier to another. No government wants to lose. No state wants to lose. No community wants to lose. The formula became a battlefield disguised as an administrative document.
THE ECONOMIC REALITIES THAT MADE 2025 THE BREAKING POINT
The cost of governance rose sharply across the country before 2025. Prices of basic items climbed. Infrastructure costs increased. State responsibilities expanded due to constitutional amendments.
Population growth created new governance demands. Meanwhile crude production struggled below target because of theft, pipeline loss, vandalism and ageing fields. That meant less money entered the federation account.
When less money enters a rigid formula, everybody feels the pain.
That is why 2025 became the year when the formula faced loud and unavoidable scrutiny. The numbers were simply too tight for the old structure to survive without question.
THE NEW VOICES THAT TURNED THE OLD DEBATE INTO A NATIONAL TOPIC AGAIN
Host communities became more organised in 2025 than in previous years. Their messaging sharpened. They pointed directly at the Petroleum Industry Act and said the three percent allocation was not only small but unacceptable. Their argument gained national attention because it was supported by visible realities. Coastlines in several areas remained polluted. Pipelines leaked. Cleanup processes dragged for months. Youth in these communities struggled with unemployment despite living on oil rich land.
At the same time civil society groups raised fresh concerns about transparency. They asked why Nigeria had not fully updated the revenue sharing formula for decades. They demanded explanations for how derivation funds were calculated and distributed. They questioned delays in recognising new oil producing states. They asked why host communities with the most damage receive the least direct share.
These voices brought the argument to everyday Nigerians who usually see the formula as a political puzzle. Suddenly people realised that the debate affected fuel prices, national debt management, state salaries, and federal infrastructure.
THE GLOBAL CONTEXT THAT MAKES NIGERIA’S FORMULA EVEN MORE DELICATE
The world is shifting slowly from fossil fuels. Major countries are pushing renewable energy. Oil companies are investing more in offshore fields because onshore regions carry too many risks. Nigeria is under pressure to diversify revenue sources and reduce dependence on crude. This global shift means Nigeria’s oil driven revenue system faces long term uncertainty.
If Nigeria wants to update the formula, it must do so before oil loses more relevance. That is another reason 2025 became critical. With major oil companies reviewing their portfolios and moving away from onshore operations, the revenue structure must adapt. New investments will likely come from deepwater fields, and this raises new questions about how derivation works when oil does not lie within the boundaries of any state.
The country cannot ignore these questions forever.
THE POLITICS THAT MAKE THE REVIEW EXTREMELY COMPLEX
The RMAFC review sparked fear in several political camps. If the formula changes in favour of oil producing states, non producing states lose. If the formula shifts in favour of the centre, states lose. If the formula recognises more producing states like Enugu, the existing producing states may lose a slice of their allocation. If host communities receive more under the PIA, oil companies adjust their cost structures and state allocations may reduce indirectly.
This tangled circle of interests means the review process will be slow and contentious. Politicians negotiate behind closed doors. Technical committees try to design formulas that appear fair. Analysts warn that whatever new structure emerges will still require further adjustments in the future.
The political class knows that changing the formula is like rearranging the financial map of Nigeria. That is why the scrutiny in 2025 felt louder and heavier than any in recent memory.
THE FUTURE AHEAD: Will Nigeria finally update the formula?
The RMAFC review continues. No final version of the new formula has been released publicly. Host communities are still pushing. Oil producing states are still demanding. The centre remains firm on its responsibilities. Civil society groups insist that transparency must accompany any new design. Economists argue that Nigeria must reduce dependence on oil altogether if it wants a sustainable revenue system.
But one thing is already clear. The events of 2025 forced Nigeria to confront the truth it had avoided for years. The revenue sharing formula cannot remain frozen in the 1990s. The country has changed too much. Oil patterns have shifted. Communities have carried too much burden. States have too many responsibilities. The federation account no longer behaves predictably. The entire structure requires a new foundation.
Whether Nigeria succeeds in producing a formula that everybody sees as fair is another matter entirely. But at least the national conversation has returned with honesty. At least people can no longer pretend that the old system works.
CONCLUSION: The year the quiet anger finally turned into a national debate
Nigeria’s oil sector revenue sharing formula did not suddenly break in 2025. It had been cracking for years, but the country avoided looking directly at the fractures. What changed in 2025 was the intensity of the pressure. Host communities spoke louder. Oil producing states demanded clarity. Other states insisted on fairness. The federal government faced growing fiscal strain. Civil society exposed inconsistencies. RMAFC finally stepped forward with a formal review.
The country now stands in a moment of reconsideration. The formula is being examined from every angle. Everything is on the table. Nothing is sacred. And for the first time in a long time, Nigerians can imagine the possibility of an updated structure that matches the realities of the present rather than the memories of the past.
Whether this moment leads to a truly new formula or simply becomes another cycle of complaints and delays remains to be seen. But one thing is sure, the scrutiny is real. The pressure is real and the debate is not going away.
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