Nigeria’s government has written off more than $1.42 billion in legacy debt owed by the state-owned energy company NNPC Ltd to the Federation Account, in what officials describe as a major fiscal reset for the country’s largest revenue generator.
A further N5.57 trillion has also been cancelled following a reconciliation of records between NNPC and the government, according to documents from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). The adjustment was based on recommendations from the Stakeholder Alignment Committee.
The write-off covers obligations up to 31 December 2024, including Production Sharing Contracts (PSC), domestic supply commitments, repayment agreements, modified carry arrangements and joint venture royalties.
At the October 2025 meeting of the Federation Account Allocation Committee (FAAC), NUPRC reported NNPC’s outstanding debts at $1.48 billion and N6.33 trillion, linked to PSC, Direct Sale Direct Purchase (DSDP) deals, repayment agreements and royalty receivables. Most of these balances have now been removed following President Bola Tinubu’s directive.
“Out of $1.48 billion and N6.33 trillion, the affected obligations written off are $1.42 billion and N5.57 trillion,” the commission said, adding that the appropriate accounting entries had been passed.
The move effectively clears about 96% of NNPC’s dollar-denominated debt and 88% of its naira-denominated liabilities, easing pressure on Nigeria’s public finances and marking one of the largest debt cancellations in the company’s history.
NNPC’s mounting debt situation
NNPC has faced a massive debt burden in recent years, with statutory obligations (linked to crude oil liftings, royalties and supply contracts) to the Federation Account running into billions of dollars.
The national oil company often withheld or delayed remittances to the Federation Account, creating arrears in unpaid royalties from oil production agreements accumulated over years, as well as complex swap deals for crude oil and refined products that left unsettled balances.
Analysts point to weak transparency and political interference in NNPC’s operations as drivers of debt accumulation.
Despite the debt write off, NNPC still faces residual liabilities of about $60 million and N760 billion outstanding, primarily linked to ongoing PSC royalties and unsettled balances.
The regulator says that while past debts have been largely cleared, newer 2025 obligations (between January to October) remain outstanding and are being actively tracked/recovered.
Moreso, a separate dispute over alleged under-remittance of $42.37 billion between 2011 and 2017 remains unresolved, even though NNPC rejected the claims and insisted all revenues were properly accounted for.
“Fiscal reset”: Good or bad for NNPC?
Nigeria’s decision to write off billions in debt owed by the Nigerian National Petroleum Company Limited (NNPC Ltd) is part of a wider fiscal restructuring aimed at stabilising public finances. Officials say clearing the arrears will improve cash flow for federal, state and local governments that depend heavily on oil revenues.
The move also reflects Nigeria’s push to restructure and corporatise NNPC under the 2021 Petroleum Industry Act, with the goal of making the company more commercially viable. But analysts warn that repeated debt cancellations may raise governance concerns and deter foreign investment.
Despite recently recording a historic high of 355,000 barrels per day of production — the strongest in more than three decades — NNPC has faced criticism from the World Bank for failing to fully remit oil revenues to the Federation Account.
The bank argues that the company’s continued monopolistic control over crude sales and foreign exchange inflows has created persistent gaps between reported earnings and actual remittances.
“Despite the subsidy being fully removed in October 2024, NNPC Ltd started transferring the revenue gains to the Federation only in January 2025. Since then, it has been remitting only 50 per cent of these gains, using the rest to offset past arrears,” the World Bank said.
Between January and August 2025, NNPC is reported to have disbursed just $283 million (N424 billion) to the Federation Account under its production sharing obligations, while failing to allocate any interim dividends during the same period.
