Fuel Subsidy Removal: NNPC Offsets $4.68bn Cash Call Debt To IOCs

The Nigerian National Petroleum Company Ltd (NNPCL) has confirmed clearing its outstanding $4.68 billion cash call debt to the five international oil companies operating in Nigeria.

The company said it is no longer owing any dues, a milestone achieved following the total removal of subsidy on Premium Motor Spirit(petrol).

The group chief executive officer, of the company, Mele Kyari, made this known while speaking on Monday at the 42nd NAPE Annual International Conference & Exhibition in Lagos.

The cash calls in Nigeria’s oil sector are funding requests by NNPC and its joint venture partners—including companies like Mobil, Chevron, Shell, TotalEnergies, and Agip—to cover capital and operational expenses for oil projects.

The NNPC GCEO, in his presentation, credited President Bola Tinubu’s decision to end subsidy payments, describing it as a critical move towards Nigeria’s economic health.

“This decision, although initially challenging with impacts on inflation and the cost of commodities, was necessary to halt the harmful practice of petrol subsidies. President Tinubu has effectively stopped Nigeria from ‘smoking cigarettes,’ restoring the nation’s economic health,” Kyari explained. Kyari acknowledged that, while the subsidy removal may cause temporary financial strain, he encourages more prudent energy use.

To him, “When SUV drivers realise they’re spending N100,000 per tank, they’ll reconsider their habits, and public transportation will likely see a resurgence. Now the public transportation system will return, and people will now transfer those transactions into useful ventures. In the past, the quickest way to spend was on subsidised fuel, but now Nigerians can invest their savings more productively, potentially in the stock market.”

Kyari emphasised that NNPC can now prioritise its core focus on the upstream sector, noting that the subsidy burden often forced the company to divert funds, leading to cash call defaults with joint venture partners. With this distraction eliminated, we no longer owe any of our partners, Kyari confirmed.

He further added that, financial stability allows NNPC to sustainably drive energy production, benefiting all Nigerians by reinvesting resources and creating prosperity, while further highlighting the government’s efforts to expand gas infrastructure, establish gas-based industries, and improve the national grid.

In three to four years, I believe we will see transformations in the sector that didn’t happen over the past 40 years, he stated.

Over the years, the federal government, through the Nigerian National Petroleum Company (NNPC), accumulated significant unpaid cash call obligations.

These were payments it was required to make to international oil companies (IOCs) with whom it held joint venture agreements for oil exploration and production.

NNPC’s long standing inability to meet cash call obligations prior to now, had a significant impact on Nigeria’s upstream oil and gas sector, causing operational strain and stalling growth.

However, NNPC’s consistent default on these payments has burdened Nigeria’s upstream sector for years, undermining investor confidence and slowing down exploration and development projects.

The history of NNPC’s cash call defaults can be traced back to the early 2000s when the company began struggling to cover its share of funding in JV operations.

By 2016, the backlog had become critical, prompting the Nigerian government to establish a $5.1 billion debt repayment plan to cover accumulated cash call arrears. The amount was later negotiated down to $4.68 billion in December of that year.

As of 2023, NNPC’s debt to JV partners remained substantial, and delays in payment were a recurring source of frustration for IOCs.

The debt, according to some IOCs, represented a significant financial gap that constrained investments in new projects and essential maintenance activities, intensifying Nigeria’s struggle to boost oil production amid shifting global oil prices and the mounting demands of the energy transition.