President Bola Tinubu has authorised the cancellation of N9.4 trillion ($1.42bn and N5.57tn) in historic debts owed by the Nigerian National Petroleum Company Limited to the Federation Account, a move that clears the state oil firm’s books of nearly all legacy liabilities but ignites fresh concerns over fiscal discipline.
The approval, detailed in a Nigerian Upstream Petroleum Regulatory Commission report presented to the Federation Account Allocation Committee in November, follows recommendations from a Stakeholder Alignment Committee. The committee reconciled NNPC’s liabilities up to December 31, 2024, related to Production Sharing Contracts, Direct Sale Direct Purchase arrangements, and royalty receivables.
The directive effectively wipes out 96% of the outstanding dollar-denominated debt ($1.42bn of $1.48bn) and 88% of the naira-denominated obligations (N5.57tn of N6.33tn). The NUPRC confirmed it has “passed the appropriate accounting entries as approved.”
Fresh Debts Accumulate as Historic Ones Are Cleared
However, the massive write-off comes as the company continues to accrue new shortfalls. The same report reveals that for the period January to October 2025 alone, fresh NNPC obligations already stand at $56.8 million and N1.02 trillion. A partial payment of $55 million was made in October, leaving a significant balance.
Analysts have questioned the timing and optics of the debt cancellation, as it coincides with a catastrophic collapse in current oil and gas revenue collections. Data for November 2025 shows royalty payments, the backbone of upstream earnings, collected only N605.26bn against a N1.144tn target—a monthly deficit of N538.92bn.
The cumulative revenue shortfall is staggering. As of November 30, 2025, the NUPRC reports an overall revenue gap of N5.65tn (N7.60tn collected vs. N13.25tn approved), with royalties alone underperforming by N5.63tn.
“A Dangerous Precedent,” Say Economists
“This creates a dangerous precedent,” said Prof. Emeritus Wumi Iledare, a petroleum economics expert. “While reconciling legacy issues under the old, flawed system is necessary, wiping the slate clean in secrecy, while current revenues are in freefall and new debts are piling up, signals a lack of consequence for fiscal failure. It undermines the transparency promises of the Petroleum Industry Act.”
The write-off also stands in stark contrast to an unresolved, separate audit dispute. The Nigeria Governors’ Forum’s consultant, Periscope Consulting, alleges a $42.37bn (N12.91tn) under-remittance by NNPC between 2011 and 2017. NNPC has rejected the claim, leading to a FAAC-mandated stalemate and joint reconciliation talks that are still ongoing.
World Bank Warnings Ignored
The President’s move appears to sideline persistent warnings from institutions like the World Bank, which recently accused NNPC of remaining “a key source of revenue leakages” and failing to fully remit oil revenues, thereby undermining macroeconomic stability.
When contacted for comment, NNPC’s spokesperson reiterated the company’s commitment to transparency and stated the write-off was a formal conclusion to long-standing reconciliation, allowing the company and the federation to start with a clean slate on historic issues.
Finance ministry officials declined to comment beyond the FAAC document.
The debt cancellation removes a major contingent liability from the nation’s balance sheet but leaves pressing questions unanswered: Will this enable greater NNPC accountability going forward, or does it reward past fiscal irresponsibility at a time when the federation can least afford it?
