The Nigerian National Petroleum Company Limited (NNPCL) has secured ₦318.05bn between January and August 2025 to finance oil exploration in inland basins, according to documents from the Federation Account Allocation Committee (FAAC).
The funds represent 30% of profits from Production Sharing Contracts (PSC), which are automatically deducted each month for exploration in under-explored areas.
This allocation is mandated by the Petroleum Industry Act (PIA) 2021, which established the Frontier Exploration Fund to support drilling in basins such as Anambra, Bida, Dahomey, Sokoto, Chad, and Benue.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) manages the fund and, in July 2025, released a Frontier Basin Exploration and Development Plan.
Signed by NUPRC Chief Executive Gbenga Komolafe, the plan outlined seismic surveys, wildcat drilling, and reappraisal of wells across several basins.
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Despite PSC profits of ₦1.06tn falling short of the ₦1.58tn budgeted, the statutory deductions were consistently applied.
Monthly contributions ranged from as little as ₦6.83bn in June to ₦78.94bn in August, with cumulative inflows reaching ₦318.05bn by the end of August.
NNPCL also received an equivalent amount as management fees, bringing total receipts for the company to ₦636.1bn in the period.
However, FAAC documents show that the Federation Account, which receives 40% of PSC profits, recorded only ₦424.07bn year-to-date—well below the ₦631.57bn projection.
The shortfall has been worsened by NNPCL’s failure to remit interim dividends, budgeted at over ₦2tn for the year.
The issue prompted FAAC to set up a special committee to scrutinize the deductions. NNPCL was asked to submit detailed financial records of frontier exploration activities by September 19, though the documents indicate the process remains ongoing.
Budget Office Director-General, Tanimu Yakubu, warned in Abuja that Nigeria had lost nearly 60% of gross oil revenue since the PIA took effect, as both management fees and frontier allocations consume 60% of PSC profits.
He noted that oil revenues underperformed in the first half of 2025 due to weak prices and output, and revealed that moves are underway in the National Assembly to amend the PIA.
President Bola Tinubu has also ordered a review of revenue retention by major agencies, including NNPCL, FIRS, Customs, and NUPRC.
He specifically directed a reassessment of the 30% deductions, tasking the Economic Management Team to recommend alternatives that could boost public savings and strengthen fiscal stability.
But the planned reforms face resistance. The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) have cautioned that altering the PIA or weakening NNPCL’s role could destabilize the oil sector and endanger workers’ welfare.
Industry experts remain divided. Oil and gas analyst Ademola Adigun described the 30% allocation as “unrealistic and too high,” suggesting it be cut to 10%.
Conversely, Professor Dayo Ayoade, an energy law scholar at the University of Lagos, warned against rushing amendments, stressing that the PIA took nearly two decades of negotiations.
He argued that while NNPCL must account for its spending, frontier exploration should ultimately be left to private investors incentivized through tax breaks.
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