NNPC’s $1.42bn Debt Write-Off And Matters Arising

President Bola Tinubu’s recent approval to cancel approximately $1.42 billion and ₦5.57 trillion in debts owed by the Nigerian National Petroleum Company Limited to the Federation Account raises more questions than it answers. The two figures written off totalled either $5.39 billion or N7.55 trillion using the exchange rate of N1400/$1.

While the presidency frames this as a reform measure to address legacy obligations, the opacity surrounding this decision and its potential constitutional violations deserve scrutiny from Nigerians who have watched their national oil company operate with troubling impunity.

The announcement, delivered through a document from the Nigerian Upstream Petroleum Regulatory Commission at November’s Federation Account Allocation Committee meeting, presents this write-off as a done deal. But here’s what the federal government isn’t telling you: this decision affects money that doesn’t belong solely to the federal government.

The Federation Account represents pooled revenues meant to be shared among federal, state and local governments. By unilaterally cancelling debts owed to this account, the president may have exceeded his constitutional authority.

Section 162 of the 1999 Constitution is explicit about how Federation Account revenues must be handled. Any decision affecting these funds requires proper appropriation through the National Assembly and agreement from all tiers of government that hold stakes in these resources.

Yet there’s no evidence this write-off went through any such process. The presidency’s statement mentions a “Stakeholder Alignment Committee” whose composition and mandate remain mysterious. Were state governors consulted? Did local government representatives have a say? Or was this another backroom arrangement that treats constitutionally mandated revenue-sharing as an inconvenience?

The timing is particularly galling. Just months ago, the Auditor-General of the Federation published a damning report detailing NNPC’s systemic violations of financial regulations, weak internal controls and unexplained payments under questionable contracts. The audit revealed fund misappropriation, inflated contracts, irregular payments and failure to deduct statutory taxes.

In one instance alone, NNPC failed to collect ₦247 million and $529,863 in stamp duties from contractors between 2020 and 2021. Now, rather than holding NNPC accountable for these violations, the federal government has rewarded the company by erasing nearly $1.5 billion in obligations.

The debts being cancelled supposedly cover “legacy obligations” from production sharing contracts, domestic supply obligations, repayment agreements and joint venture royalty receivables accumulated through December 2024.

But what exactly were these obligations? Who verified them? Were there independent audits establishing their legitimacy? The document mentions that “corresponding accounting adjustments have already been effected in the Federation Account,” which suggests this is fait accompli – the money is gone before states and local governments even knew what hit them.

What makes this more troubling is the unresolved dispute over an alleged $42.37 billion under-remittance between 2011 and 2017. NNPC insists all revenues during this period were properly accounted for, but where is the independent verification? For a company that recently failed to collect millions in statutory taxes and whose operations the Auditor-General found riddled with irregularities, NNPC’s word isn’t exactly bankable. Yet the federal government appears content to let this astronomical sum remain in limbo while writing off debts that are comparatively small.

The constitutional implications here are serious. If President Tinubu can unilaterally cancel debts owed to the Federation Account without legislative approval or consultation with state and local governments, what prevents future presidents from doing the same?

This sets a precedent that effectively renders the Federation Account meaningless – just another pot of money the federal government can manipulate at will.

State governors, who are usually quick to defend their revenue allocations, have been conspicuously silent. The National Assembly’s role in this debacle also demands examination. Did the Finance Minister present this proposal to the relevant committees? Was there any debate about the propriety of writing off public debt to a state-owned enterprise that operates with minimal transparency? Or did legislators simply rubber-stamp another executive decision because challenging it would be politically inconvenient?

In our opinion, Nigeria’s energy sector desperately needs reform, but debt forgiveness without accountability isn’t reform – it’s capitulation. Before any debt write-off should have been considered, NNPC should have been required to address the Auditor-General’s findings, implement robust internal controls, demonstrate transparency in contract awards and prove it can operate without perpetually requiring federal bailouts.

The federal government claims new obligations from January to October 2025 are still being tracked and recovered. This is supposed to reassure us, but it raises an obvious question: if NNPC continues accumulating debts despite this massive write-off, what exactly has been solved? Are we simply delaying the next round of debt forgiveness?

In our view, states and local governments should challenge this write-off in court. The precedent is too dangerous to allow unchallenged. If the federal government genuinely believes this debt cancellation was necessary and proper, let it defend that position before the judiciary with full transparency about how the decision was made, who was consulted and what constitutional authority permits unilateral manipulation of Federation Account funds.

Nigerians deserve answers. The Federation Account isn’t the president’s personal treasury to dispense as he sees fit. Every naira and dollar in that account represents resources meant to serve all Nigerians through all three tiers of government.

Until the federal government provides satisfactory answers to these questions and demonstrates it obtained proper authority for this write-off, this decision should be treated as what it appears to be: another example of the opaque, unaccountable governance that has kept Nigeria from realizing its potential.​​​​​​​​​​​​​​​​