President Bola Ahmed Tinubu has approved the write-off of a substantial portion of debts owed by the Nigerian National Petroleum Company Limited (NNPC Ltd) to the Federation Account, amounting to about $1.42 billion and N5.57 trillion, following a reconciliation of records between the company and the Federation.
The approval is contained in a document prepared by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and presented at the November 2025 meeting of the Federation Account Allocation Committee (FAAC). The report has since circulated among FAAC members and key industry stakeholders.
Reconciliation ends long-running liability dispute
According to the report, NNPC Ltd’s outstanding obligations earlier presented at the October 2025 FAAC meeting stood at $1.48 billion in respect of Production Sharing Contracts (PSC), Direct Sale–Direct Purchase (DSDP), Repayment Agreements (RA), and Modified Carry Arrangements (MCA), alongside N6.33 trillion relating to Joint Venture (JV) and PSC royalty receivables.
These liabilities, which had built up over several years, have been a persistent point of contention at FAAC meetings due to their implications for cash flow into the Federation Account and monthly revenue allocations to federal, state, and local governments.
However, the NUPRC disclosed that the Presidency approved the removal of most of the balances from the Federation’s financial records following submissions by the Stakeholder Alignment Committee on the Reconciliation of Indebtedness between NNPC Ltd and the Federation.
The committee’s work involved aligning historical records, validating claims, and resolving accounting differences between both parties. Based on its findings, the President approved the cancellation of NNPC Ltd’s outstanding obligations as at 31 December 2024, effectively wiping off about $1.42 billion and N5.57 trillion from the company’s liabilities.
Fiscal and sector implications
From an energy and public finance perspective, the decision is expected to reset the relationship between NNPC Ltd and the Federation Account, particularly as the company operates as a commercial entity under the Petroleum Industry Act (PIA).
While the write-off may ease pressure on NNPC Ltd’s balance sheet and improve its financial positioning, analysts say it also underscores the need for clearer remittance frameworks, stronger cost transparency, and tighter reconciliation processes to prevent a re-emergence of disputed obligations in the future.
The move comes at a time when FAAC revenues remain under pressure from fluctuating oil output, rising subsidy-related costs in recent years, and ongoing efforts to stabilise Nigeria’s public finances.
