Market News

BY Segun Adeyemi

The Federal Government has wiped out about $1.42 billion in historical debts owed by the Nigerian National Petroleum Company Limited to the Federation Account, in a move authorised by President Bola Tinubu after extensive record reconciliation.

• Nigeria has cancelled about $1.42 billion in historical debts owed by NNPC Ltd to the Federation Account after a reconciliation exercise.
• The decision wipes out most legacy liabilities but leaves fresh 2025 obligations still outstanding.
• The move comes amid persistent revenue shortfalls and missed royalty targets in the upstream oil sector.
• Long-running disputes over oil revenue remittances continue to raise questions about transparency and fiscal discipline.

The cancellation, contained in a report by the Nigerian Upstream Petroleum Regulatory Commission and presented to the Federation Account Allocation Committee in November, also included the removal of a large tranche of naira-denominated obligations.

The commission’s document, titled “Report of October 2025 Revenue Collection Presented at the Federation Account Allocation Committee Meeting Held on 18th November 2025,” shows that prior to reconciliation, NNPC’s outstanding liabilities to the Federation stood at roughly $1.48 billion and N6.33 trillion.

After a detailed review and a directive from the Presidency, most of these legacy balances were struck from the books, leaving just a fraction intact.

According to the regulator, “out of $1,480,610,652.58 and N6,332,884,316,237.13, the affected outstanding obligations that have been nil off are $1,421,727,723.00 and N5,573,895,769,388.45.”

That translates to the government erasing around 96 per cent of the dollar-denominated debt and around 88 per cent of the naira-denominated obligations previously reported as due.

The government’s action follows recommendations from the Stakeholder Alignment Committee on the Reconciliation of Indebtedness between NNPC Ltd and the Federation, which audited royalty entitlements and oil lifting-related liabilities through to the end of 2024. Even with the sweeping write-off of historic balances, however, new debts have continued to accumulate in 2025.

In a separate section of the report, the regulator disclosed that statutory obligations for the period from January to October 2025 stood at about $56.8 million and N1.02 trillion, with most of the dollar amount still outstanding after partial recovery during the review month.

The commission confirmed that it had begun implementing the accounting changes in the Federation Account following presidential approval, a step that effectively resolves longstanding disputes over legacy liabilities between the national oil company and the federal government.

The NNPCL recently disclosed that it had accumulated a staggering $6 billion in debt, adding further pressure to the already strained fuel market. 

Despite the cancellation of older NNPC debts, the broader energy sector has struggled to meet revenue expectations for the year. The report seen by local media revealed that actual revenue collections in November 2025 amounted to just N660.04 billion, far below the approved monthly target of N1.204 trillion. This left a gap of N544.76 billion for the month. Royalty collections, a key source of upstream revenue, were also significantly under target.

Cumulative figures tell a similar story: as of the end of November, the regulator’s total approved revenue target for the year was N13.25 trillion, compared with actual collections of N7.60 trillion, leaving a shortfall of N5.65 trillion. Royalty income alone showed a N5.63 trillion deficit against projections.

The shortfall highlights persistent challenges in Nigeria’s oil revenue management, raising questions about the sustainability of fiscal expectations based on projections that remain heavily reliant on petroleum earnings, even as OPEC output quotas and global demand fluctuate.

The backdrop to this financial recalibration includes a resurgence of dispute between NNPC and Periscope Consulting, the audit firm hired by the Nigeria Governors’ Forum to investigate alleged under-remittances of oil revenue totalling about $42.37 billion for 2011-2017.

That dispute, rekindled by fresh submissions from both sides, led FAAC to mandate a formal reconciliation process to determine the actual state of remittances.

NNPC has rejected allegations from the audit that significant sums were not remitted, arguing that all crude oil proceeds and associated earnings were fully accounted for.

Periscope, meanwhile, has maintained that its findings exposed major gaps that remain unresolved. FAAC’s sub-committee ordered joint meetings between the two parties to harmonise records, underscoring that the work remains ongoing.

Industry experts say such disputes reflect deeper structural flaws in the pre-Petroleum Industry Act governance regime, where overlapping roles and weak controls made accurate revenue reconciliation difficult.

They argue that disciplined implementation of the PIA, real-time monitoring, and independent audits can help prevent similar controversies in the future.

On the international front, institutions such as the World Bank have criticised NNPC for inconsistent remittances, noting that, even after corporatisation, it has lagged in fully transferring oil earnings to the Federation Account, thereby undermining fiscal transparency and macroeconomic stability.

Calls for stronger oversight and more precise disclosure mechanisms have been part of broader recommendations to strengthen revenue management.

Since taking office, NNPC Ltd’s Group Chief Executive Officer, Bayo Ojulari, has pledged to improve transparency and accountability, assuring investors and the public that the company’s books would reflect full compliance with fiscal rules.

The latest write-off, while controversial, represents a significant reset in the relationship between the national oil company and government finances.