The Nigerian National Petroleum Company Limited (NNPCL) has received a massive ₦318.05 billion between January and August 2025 for frontier oil exploration, even as the company failed to remit a single kobo in dividends to the Federation Account this year.
Findings from Federation Account Allocation Committee (FAAC) documents obtained by The PUNCH revealed that the deductions were made consistently every month in line with the Petroleum Industry Act (PIA) 2021, which mandates that 30 per cent of Production Sharing Contract (PSC) profits be channeled into the Frontier Exploration Fund.
The Act also allows NNPCL to collect an additional 30 per cent of the same profits as management fees. This means that within the first eight months of 2025, the national oil company pocketed a combined ₦636.1bn—₦318.05bn for frontier exploration and another ₦318.05bn as management charges.
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Frontier deductions slash FAAC inflows
The deductions came at a huge cost to the Federation Account, which is entitled to 40 per cent of PSC profits. FAAC records showed that while PSC profits stood at ₦1.06 trillion by August, statutory deductions by NNPCL left the Federation with only ₦424bn—far short of the budgeted ₦631bn.
This left a revenue gap of ₦207.5bn, compounding the cash crunch faced by the three tiers of government. Matters were worsened by the non-performance of NNPCL’s interim dividend line, which was projected to contribute ₦2.16 trillion year-to-date but has yielded nothing.
The monthly breakdown further highlighted the volatility of the frontier fund. In June, when PSC profits collapsed to just ₦22.7bn, the frontier account received a mere ₦6.83bn, its lowest level this year. But by August, when profits surged to ₦263.1bn, the fund jumped to ₦78.9bn—its highest yet.
Across the eight months, allocations fluctuated sharply, from as little as ₦6.8bn in June to as much as ₦78.9bn in August. Despite this instability, the automatic 30 per cent deduction rule ensured that frontier exploration remained consistently funded, regardless of the strain on federal revenues.
Experts, unions and Tinubu clash over policy
The size and structure of the deductions have triggered sharp debate across the oil and gas sector. At a stakeholders’ meeting in Abuja, the Director-General of the Budget Office, Tanimu Yakubu, revealed that Nigeria had lost nearly 60 per cent of its gross oil revenues since the PIA took effect, blaming the 30 per cent deductions for frontier exploration and management fees.
“Once the Act came into effect without new revenue sources to replace the loss, we lost a sizable part of what used to fund 80 per cent of public expenditure,” Yakubu warned. He has since begun moves in the National Assembly to push for amendments to the PIA.
Oil and gas expert, Mr. Ademola Adigun, also faulted the current framework, describing the 30 per cent frontier allocation as “unrealistic and too high.” He insisted that the deduction should be cut to a maximum of 10 per cent. “The money allocation is unrealistic, too high. It is not well used now,” Adigun said.
However, not all stakeholders support an amendment. Professor Dayo Ayoade, an energy law scholar at the University of Lagos, cautioned against hasty changes to the law, stressing that it took almost two decades of negotiations to achieve consensus on the PIA.
“It took us 19 years of reform to agree on the PIA, and the PIA is a delicate balance of compromises. The Frontier Exploration Fund, in many ways, was like a counterbalance to the Host Community Trust Fund,” Ayoade explained.
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He argued that while NNPCL must be made to account for how it spends the ₦318bn it has received so far this year, frontier exploration should ideally be liberalised and left to private investors willing to take the risk, rather than government funding through NNPCL.
Meanwhile, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) have warned against government attempts to strip NNPCL of its powers under the PIA. The unions insist that tampering with the Act could destabilise the oil sector, endanger workers’ welfare, and even bankrupt the national oil company.
The controversy has now drawn the attention of President Bola Tinubu. During last month’s Federal Executive Council meeting, the President ordered a review of deductions and revenue retention practices by all major revenue agencies, including NNPCL, FIRS, Customs, and NUPRC.
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Tinubu specifically called for a reassessment of the 30 per cent frontier and management fee deductions, directing the Economic Management Team to submit actionable recommendations on how to plug loopholes and free up more money for public expenditure.
For now, the battle lines are drawn: NNPCL continues to rake in hundreds of billions for oil exploration in unproven basins, experts are demanding urgent cuts, unions are resisting any tampering with the PIA, and government is under pressure to close a widening revenue shortfall.
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