The Federation has racked up a staggering N17.5tn as debt owed to the Nigerian National Petroleum Company Limited for pipeline protection and energy security operations the oil giant undertook on behalf of the nation in the financial year ended 2024.
This came as analysts demanded a forensic audit of the N17.5tn spending, and expressed concern over the pipeline protection and energy-security costs, citing persistent leakages, low crude production, and systemic opacity in the national oil company.
Findings showed that out of the total amount, N7.13tn was spent as energy-security costs to keep petrol prices stable whenever the gap between the exchange rate and the ex-coastal price of refined petrol widened. This is according to NNPC’s 2024 consolidated financial statements, analysed by our correspondent on Thursday.
The costs also showed that a significant portion of the expenditure went into safeguarding Nigeria’s critical oil and gas infrastructure. This included pipeline surveillance, repairs, prevention of crude oil theft, and security operations aimed at ensuring an uninterrupted energy supply across the country.
Recall that on Monday, the Nigerian National Petroleum Company Limited declared a profit after tax of N5.4tn for the financial year ended 2024, marking one of its strongest performances since its transition into a limited liability company. The Group Chief Executive Officer of NNPCL, Bayo Ojulari, announced the financial results during a press briefing in Abuja.
The latest figures represent a sharp improvement from the 2023 financial year, when the company posted a Profit After Tax of N3.297tn. The 2024 profit reflects a 64 per cent year-on-year increase, signalling the impact of higher production volumes, cost-cutting measures, and enhanced operational efficiency across its assets.
In the document, NNPC disclosed that N8.67tn of the total amount was spent directly as under-recovery on refined petroleum products, highlighting the immense financial burden of maintaining operations under regulated fuel prices.
Under Section 64(m) of the Petroleum Industry Act (PIA) 2021, any cost incurred by NNPC Limited (Group) as the “supplier of last resort” for energy-security purposes is to be borne by the Federation. In line with this provision, the Federal Government directed that NNPC Ltd must not sell Premium Motor Spirit above a fixed, regulated price. However, the actual import cost of PMS is often significantly higher than this regulated pump price.
This gap between the true landing cost of PMS and the approved selling price gives rise to under-recovery. The under-recovery amount is applied to reduce the Group’s cost of sales, while the corresponding balance is either netted off against liabilities owed to the Federation or recorded as a receivable from the Federation.
The report read, “In line with Section 64/M) of the Petroleum Industry Act 2021, the cost incurred by NNPC Limited (Group) as the energy supplier of last resort for energy security reasons, and all associated costs shall be on the account of the Federation. The government instructed that NNPC Limited cannot sell its Premium Motor Spirit above a certain regulated price.
“However, the cost of importing this PMS is usually much higher than the regulated price. The under recovery is essentially the difference between the actual landing cost of the product and the regulated price. This balance is used to reduce the cost of sales of the Group. The corresponding entry is either used to reduce the liability due to the Federation or used as a receivable from the Federation.”
A breakdown showed that the year opened with an under-recovery balance of N6.25tn, up from N2.06tn in 2023. After deducting an exchange-rate difference of N40.95bn, the opening balance stood at N6.21tn.
It added that energy-security costs rose sharply to N7.13tn in 2024, compared to N4.843tn in 2023. As of December 31, the total amount owed under energy-security expenses had climbed to N8.67tn, up from N6.25tn the previous year, representing an increase of N2.42tn, or roughly 38.7 per cent.
Another N8.84tn was recorded under “Other Receivables from Federation,” covering advances to the Federal Government and additional security costs incurred in protecting oil and gas assets.
These payments were made under an approval framework between the government and NNPC, allowing the company to shoulder costs upfront and recover them later from the Federation.
“Other receivables from federation relate to advance payment to federation and the security costs incurred in protecting the oil and have assets. This is under the framework of approval between the group and the government of Nigeria to incur security costs and charge the same to the federation,” the report read.
The disclosure underscores growing pressure on NNPC’s balance sheet, as the company continues to operate with the expectation of reimbursement from the government.
It also raises a question about President Bola Tinubu’s May 29, 2023 announcement that “fuel subsidy is gone,” a statement that was expected to mark a decisive end to decades of costly subsidy spending but which now appears at odds with emerging figures showing continued government support for petrol pricing.
The 2024 debt nearly doubled the N9.36tn recorded in 2023, reflecting mounting strain on NNPC’s cash flow and the increasing financial challenge of maintaining national energy security while meeting the government’s fuel price regulations.
However, the document offered no indication of whether the Federal Government has refunded any part of the amount or outlined a plan to offset the mounting bill, leaving the repayment timeline unclear. The figures underscore the mounting financial pressure on Nigeria’s national oil company amid an environment of regulated fuel prices, exchange-rate volatility, and rising operational costs.
As Nigeria grapples with energy infrastructure security and under-recovery of fuel costs, stakeholders insist that a transparent and timely reimbursement framework is critical to avoid passing the financial burden onto NNPC, and ultimately, the Nigerian public.
Meanwhile, the NNPC report shows that throughput charges rose to N145.7bn in 2024, representing commissions paid to private depot owners for handling petroleum products at terminals. It added that marketing and distribution expenses cover the cost of transporting petroleum products to water-fed depots within and outside the country.
Commenting on the report, Proshare, a leading Nigerian financial information and investment research platform, described the 2024 financial results as “strong and commercially encouraging,” highlighting significant revenue growth across multiple segments.
In its commentary on the financial statements, Proshare noted, “NNPC delivered robust top-line and operating performance in FY 2024, with total revenue rising by 87.89 per cent, from N23.99tn in FY 2023 to N45.08tn in 2024.
This growth was broad-based but primarily driven by crude oil sales, which more than doubled to N29.21tn, reflecting higher national production, stabilised export volumes, and more efficient trading operations.”
The analyst platform also pointed to substantial gains from other revenue streams. “Revenue from petroleum products increased by 35.39 per cent, while natural gas and power surged 125.66 per cent, and services climbed 110.88 per cent,” Proshare said. “Power revenues alone jumped from N94m in FY 2023 to N9.42bn in FY 2024, demonstrating deeper involvement in the gas-to-power value chain.”
On profitability, Proshare observed that NNPC’s net income rose by 64.20 per cent, with EBITDA nearly doubling, improved operational efficiency, and commercial discipline. However, it cautioned, “The quality of earnings warrants careful oversight given the substantial rise in finance costs and the narrowing of gross profit margins. The growing leverage ratio underscores the importance of prudent cash-flow and liability management, particularly in light of an increasing debt-to-equity ratio and expanding inventories and receivables.”
Looking ahead, Proshare highlighted both opportunities and challenges for the national oil company. “NNPC sits at a pivotal point in its transformation under the Petroleum Industry Act. Higher national output, evolving into a more commercially-driven entity, and the emergence of new domestic refining capacity offer significant upside potential. However, sustaining this growth will require disciplined execution, tighter working-capital management, and careful navigation of the increasingly complex Nigerian and global energy markets,” the platform added.
Experts react
Commenting, energy economists and analysts raised concerns over the disclosure by NNPC that it spent N17.5tn on pipeline protection, security, and other energy-security related costs in 2024, describing the expenditure as “outrageous”, demanding a full-scale forensic audit.
The Chief Executive Officer of Petroleumprice.ng, Jeremiah Olatide, said the figures contained in the company’s 2024 financials reinforced long-standing fears of deep-rooted leakages and opacity in the national oil company.
According to him, the scale of expenditure is indefensible given the country’s daily production realities. “N17.5tn spent on pipeline security and energy-security costs in a single year is outrageous and should be probed,” Olatide said. “This reaffirms the leakages in NNPCL because one of the main causes of oil theft is internal corruption and conspiracy with oil thieves.”
He argued that despite claims of improved crude output, Nigeria’s production still averages around 1.4–1.5 million barrels per day, far below its potential of 2.5–3 million barrels per day.
“How do you justify such a humongous expense when production remains depressed?” he queried. “Declaring N17.5tn for pipeline protection and subsidy-linked costs is unacceptable. A thorough, transparent, and independent audit must be carried out.”
Olatide noted that persistent losses from theft, vandalism, and operational sabotage point to systemic collusion, insisting that the financial disclosures should trigger scrutiny by regulators and the National Assembly.
In a separate reaction, public finance analyst and co-founder of Dairy Hills, Kelvin Emmanuel, said the NNPCL’s disclosures validate long-standing allegations that crude oil is routinely allocated to armed groups under the guise of pipeline surveillance contracts.
Writing on X on Wednesday, Emmanuel said he had repeatedly warned that the government was effectively compensating militants with crude barrels, rather than cash contracts, to keep pipelines secure.
“For months I have been saying that the government is giving crude oil daily to militants for pipeline protection,” he wrote. “Now that NNPC’s financial statement shows that N7.1tn was disbursed in 2024 from supposed subsidy savings for pipeline security contracts, I am sure the 78,000 to 110,000 barrels per day is now confirmed.”
He said the figures underscore the urgent need for open contracting, third-party verification of security-related payments, and an overhaul of the opaque pipeline protection architecture that has remained unchanged for more than a decade.
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