President Bola Tinubu has approved the cancellation of a substantial portion of Nigeria’s oil revenue earnings previously owed by the Nigerian National Petroleum Company Limited (NNPCL) to the Federation Account, removing nearly $1.42 billion and N5.57 trillion in accumulated legacy obligations from government books. The decision, documented by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and presented at the November 2025 Federation Account Allocation Committee (FAAC) meeting, effectively resolves one of the nation’s most contentious financial disputes between the oil giant and the state.
The approval follows a comprehensive reconciliation exercise conducted by the Stakeholder Alignment Committee on the Reconciliation of Indebtedness between NNPC Ltd and the Federation, clearing historic financial liabilities that had accumulated up to 31 December 2024. The move signals a significant step toward settling long-standing disagreements between Nigeria’s national oil company and the federation, whilst new obligations from 2025 operations remain under active monitoring and recovery efforts.
The debt cancellation represents a massive financial adjustment to Nigeria’s revenue accounts. According to the NUPRC document titled “Report of October 2025 Revenue Collection Presented at the Federation Account Allocation Committee Meeting Held on 18th November 2025,” the original outstanding obligations stood at $1.48 billion and N6.33 trillion when reported at the October 2025 FAAC meeting. The cancellation affected multiple categories of liabilities, including Production Sharing Contracts (PSC), Domestic Supply obligations, repayment agreements, modified carry arrangements, and joint venture and PSC royalty receivables—all accumulated through various petroleum industry arrangements over preceding decades.
The figures reveal the magnitude of the financial burden. The affected outstanding obligations removed from the federation’s books totalled $1,421,727,723 and N5,573,895,769,388.45, representing approximately 96 per cent of the dollar-denominated debt and 88 per cent of the naira-denominated obligations accumulated up to the end of 2024.
The NUPRC confirmed that all necessary accounting entries reflecting the debt cancellation have been passed and implemented in the Federation Account system, officially removing these liabilities from government records and NNPCL’s balance sheet.
The approval emerged from a lengthy reconciliation process designed to clarify the true state of NNPCL’s indebtedness. The Stakeholder Alignment Committee, comprising representatives from the Federation, NNPCL, and the NUPRC, conducted a comprehensive review of outstanding obligations spanning multiple financial categories and contract types. The committee’s recommendations ultimately supported the presidential decision to clear these legacy balances.
This reconciliation effort represented an attempt to bring clarity to a historically contentious relationship between the oil company and the federation. Prior to corporatisation in 2021, NNPC operated as a monopoly with overlapping governmental and commercial functions, creating complexity in tracking and reconciling revenue flows. The reconciliation process sought to address historical discrepancies and establish clearer records moving forward.
The decision reflects an acknowledgment that distinguishing between legitimate operational advances by NNPCL and actual indebtedness to the Federation had proven difficult under the previous regulatory framework. By clearing these legacy balances in one comprehensive action, the government effectively reset the financial relationship between the entity and the federation.
Despite the cancellation of historic debts, the NUPRC clarified that newer obligations incurred between January and October 2025 remain outstanding and subject to ongoing tracking and recovery efforts. These current liabilities stood at $56,808,752.32 and N1,021,550,672,578.87 for PSC and MCA liftings and joint venture royalty receivables respectively.
The commission reported that during November 2025, it recovered $55,003,997 from the dollar component of these 2025 obligations, with the recovered amount included in revenue distributions to the Federation that month. However, the balance of approximately $1.8 million in current dollar liabilities and over N1 trillion in naira obligations remain outstanding, indicating that the company continues to accumulate obligations that are being actively managed under the new regulatory framework.
This distinction between cleared legacy debts and current liabilities signals a shift toward real-time monitoring of NNPCL’s financial obligations to the Federation. The NUPRC’s approach suggests that future debts will be tracked more carefully than historical arrangements, potentially preventing the accumulation of disputed balances in subsequent years.
While the debt write-off resolves one major financial dispute, a separate and far larger disagreement remains unresolved. A long-running dispute over alleged under-remittance of $42.37 billion between 2011 and 2017 persists, with NNPC Ltd rejecting claims and insisting all revenues were properly accounted for.
This dispute, which has been revisited multiple times by the Federation Account Allocation Committee, stems from findings by Periscope Consulting, an audit firm engaged by the Nigeria Governors’ Forum to investigate revenue remittance discrepancies during a period of significant petroleum market volatility. The audit firm’s investigation identified what it characterised as substantial shortfalls in oil revenue remittances to the Federation Account.
However, NNPC Ltd has formally rejected the audit findings, maintaining that all crude oil proceeds and associated earnings were properly recorded and remitted during the period under review. The company has consistently argued that apparent discrepancies reflect differences in accounting methodologies and timing of revenue recognition rather than actual under-remittance.
The Federation Account Allocation Committee has ordered a joint reconciliation session between NNPCL and the audit firm to determine the true state of historical remittances, but resolution remains elusive. The persistence of this dispute illustrates the complexity of reconciling revenue records across different operational and regulatory eras of Nigeria’s petroleum sector.
The debt write-off decision comes amidst international scrutiny of NNPCL’s revenue management practices. The World Bank previously accused NNPCL of failing to fully remit oil revenues to the Federation Account, undermining fiscal transparency and macroeconomic stability, noting that while the company was corporatised in 2021 to operate as a commercial entity, it still retains monopolistic control over crude oil sales and foreign exchange inflows.
The international development institution has raised concerns that despite the removal of fuel subsidies in October 2024, NNPCL initially delayed revenue transfers to the Federation. According to World Bank analysis, the company started transferring revenue gains only in January 2025 and has been remitting only 50 per cent of these gains, using the remainder to offset past arrears.
Revenue collection performance has remained challenging throughout 2025. The November FAAC report documented significant shortfalls in petroleum receipts. As of November 30, 2025, total approved revenue stood at N13.25 trillion, while actual collections reached N7.60 trillion, representing a gap of N5.65 trillion, with royalties alone recording a cumulative shortfall of N5.63 trillion.
Monthly collections have declined noticeably. While N873.10 billion was collected in October 2025, the figure declined to N660.04 billion in November, representing a shortfall of N544.76 billion against a monthly target of N1.20 trillion. These persistent shortfalls highlight ongoing challenges in petroleum revenue mobilisation despite the resolution of legacy debt disputes.
Academic analysis of Nigeria’s petroleum revenue disputes emphasises structural factors underlying the reconciliation challenges. Professor Emeritus of Petroleum Economics Wumi Iledare characterised the alleged $42.37 billion under-remittance between 2011 and 2017 as reflecting long-standing flaws in Nigeria’s pre-Petroleum Industry Act regime, noting that the former Nigerian National Petroleum Corporation operated with overlapping roles that made revenue reconciliation cumbersome and frequently disputed.
Iledare’s analysis frames the current dispute as a “legacy problem” rooted in institutional structures that have now been reformed. He stressed that similar discrepancies can be avoided only through disciplined implementation of the Petroleum Industry Act, real-time monitoring, and continuous independent audits.
This expert assessment suggests that the Tinubu administration’s decision to clear legacy debts represents an attempt to move beyond a historically problematic era, whilst the new regulatory framework—particularly the Petroleum Industry Act—is designed to prevent similar accumulations of disputed liabilities in future periods.
## Implications for Federation Revenue and Sub-national Allocations
The debt cancellation raises questions about its broader fiscal impact on the Federation and sub-national governments. Whilst the write-off provides immediate relief to NNPCL’s balance sheet, it reduces the distributable revenue pool available for allocation among the federation’s three tiers of government—the federal, state, and local authorities.
In a fiscal environment characterised by substantial budget deficits and competing claims on limited oil revenues, the removal of substantial revenue balances from government accounts could constrain resources available for capital expenditure, debt servicing, and recurrent spending at all levels of government. States, which have become heavily dependent on crude oil revenue allocations following the removal of fuel subsidies, may feel the impact most acutely.
Beyond the debt settlement, NNPCL’s leadership is pursuing broader reconciliation efforts with host communities. During a Federal Government delegation’s visit to Ogoniland on 22 December 2025, NNPCL Group Chief Executive Officer Bashir Bayo Ojulari reaffirmed the company’s commitment to peace, dialogue, and responsible energy development, stating that the visit represents a demonstration of hope and a new beginning grounded in partnership, mutual respect, and shared responsibility.
As part of this engagement, Ojulari disclosed that the process for full-time employment of 30 Ogoni indigenes has reached its final stage, with employment offers already issued, with these employees expected to resume work in January 2026. The initiative reflects broader commitments articulated by President Tinubu’s administration to rebuild trust in oil-producing communities through direct employment opportunities and economic inclusion.
Ogoniland, located in Rivers State and operated by NNPC Exploration and Production Limited (NEPL), a flagship upstream subsidiary of NNPC Ltd, holds Oil Mining Lease (OML) 11 Nigeria’s largest onshore block with the area accounting for over 40 per cent of the block’s recoverable reserves.
