In a landmark move to reset the financial standing of the national oil company, the Federal Government has approved the cancellation of massive legacy debts owed by the Nigerian National Petroleum Company Limited (NNPCL). The write-off, amounting to approximately $1.42 billion and N5.57 trillion, was finalized after a comprehensive reconciliation process sanctioned by President Bola Tinubu.
Reconciliation Ends Years of Financial Disputes
The decision, detailed in a document from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), was presented at the November meeting of the Federation Account Allocation Committee (FAAC). It stems from the work of a stakeholder committee established to resolve long-standing claims between NNPCL and the federation.
The committee meticulously reviewed historical records related to crude oil liftings, production-sharing contracts, and joint venture royalty obligations accumulated up to December 31, 2024. Following its recommendations, President Tinubu authorized the full clearance of these submitted debts, effectively wiping the slate clean on years of disputes.
The Staggering Scale of the Financial Reset
Prior to this adjustment, NNPCL's reported outstanding obligations to FAAC stood at about $1.48 billion and N6.33 trillion. The reconciliation led to the cancellation of $1.421 billion and N5.57 trillion, with corresponding accounting entries passed.
This represents a write-off of roughly 96% of the dollar-denominated debt and 88% of the naira obligations. Officials indicate this strategic move is designed to close the chapter on historical financial disagreements, allowing both NNPCL and the Federation to operate with healthier balance sheets moving forward.
2025 Liabilities and Persistent Revenue Shortfalls
However, the debt relief does not extend to obligations incurred in the current year. The NUPRC disclosed that statutory liabilities for January to October 2025, totaling about $56.8 million and N1.02 trillion from crude lifting charges and royalties, remain outstanding. A portion, $55 million, has been recovered and shared in November's FAAC allocation.
Despite this significant financial reset for NNPCL, the upstream oil and gas sector continues to face challenges. The same NUPRC document reveals that revenue collections are under severe pressure. For November, the commission missed its approved monthly revenue target by over N540 billion, driven largely by weaker-than-expected royalty receipts from oil and gas production.
This shortfall underscores the ongoing difficulties in boosting production and improving revenue flows, even as the massive debt burden is lifted. The move places a renewed focus on operational efficiency, compliance, and strategies to enhance Nigeria's oil output in the coming months.
