Tinubu Approves $1.42bn Debt Write-Off as Federal Government Clears Legacy Obligations Owed by NNPC Ltd to Federation Account

In a major fiscal and sectoral decision, President Bola Tinubu has approved the cancellation of $1.42 billion in legacy debts owed by the Nigerian National Petroleum Company Limited (NNPC Ltd) to the Federation Account, bringing long-standing reconciliation efforts closer to closure.

The approval was contained in an official document prepared by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and presented at the November 2025 meeting of the Federation Account Allocation Committee (FAAC).

Outcome of Reconciliation Process

According to the document, the debt cancellation followed extensive reconciliation exercises and recommendations by the Stakeholder Alignment Committee on the Reconciliation of Indebtedness between NNPC Ltd and the Federation.

The outcome of the process was the write-off of approximately $1.42 billion in outstanding obligations accumulated by NNPC Ltd up to December 31, 2024.

The cleared liabilities span multiple categories and contractual arrangements within Nigeria’s oil and gas sector.

Scope of the Debt Write-Off

The document detailed that the write-off covers legacy obligations arising from:

• Production Sharing Contracts (PSCs)

• Domestic crude oil supply arrangements

• Repayment agreements

• Modified carry arrangements

• Joint venture and PSC royalty receivables

“These obligations were accumulated over several years and required extensive reconciliation to establish their validity and appropriate accounting treatment,” the document stated.

It further noted that the approval was based on reconciliation work carried out by the NUPRC, with all necessary accounting adjustments already reflected in the Federation Account.

Implications for Fiscal Transparency

The clearance of the legacy debts is expected to improve fiscal clarity, strengthen intergovernmental revenue distribution, and reduce longstanding disputes over oil revenue remittances between NNPC Ltd and other tiers of government.

Analysts say the move aligns with the Tinubu administration’s broader agenda of fiscal reforms, transparency, and restructuring of Nigeria’s oil and gas sector following the commercialisation of NNPC Ltd under the Petroleum Industry Act (PIA).

Newer Debts Still Outstanding

While the bulk of historical liabilities has now been resolved, the document clarified that newer obligations incurred between January and October 2025 remain outstanding.

These newer debts, according to the report, are currently being monitored and are subject to ongoing recovery efforts.

“While past debts have been largely cleared, newer 2025 obligations (January–October) remain outstanding and are being actively tracked and recovered,” the document stated.

Unresolved $42.37bn Dispute Remains

Meanwhile, a separate and long-standing dispute over an alleged $42.37 billion under-remittance by NNPC Ltd between 2011 and 2017 remains unresolved.

While some stakeholders have continued to raise concerns over revenue shortfalls during the period, NNPC Ltd has consistently maintained that all revenues were fully remitted and properly accounted for in line with existing regulations at the time.

The document presented to FAAC did not include the disputed amount in the recent write-off, underscoring that the issue remains subject to further review and engagement.

A Step Toward Resetting Fiscal Relations

Observers say the $1.42 billion write-off represents a significant step toward resetting fiscal relations between the national oil company and the Federation, reducing inherited liabilities, and clarifying the financial position of NNPC Ltd as it operates as a commercial entity.

As Nigeria continues to grapple with revenue constraints, energy sector reforms, and competing fiscal demands, the decision is expected to shape future discussions on accountability, transparency, and revenue optimisation within the petroleum industry.