State governments have called for a forensic audit of Nigeria’s crude oil-backed borrowing arrangements, warning that opaque crude-for-loan and swap deals may be undermining inflows into the Federation Account.
The PUNCH earlier reported that the Nigerian National Petroleum Company Limited pledged 272,500 barrels per day of crude oil through a series of crude-for-loan deals totalling $8.86bn, according to an analysis of a report by the Nigeria Extractive Industries Transparency Initiative and the NNPC’s financial statements.
According to The PUNCH’s findings, NNPC has already fully repaid $2.61bn in loans, representing 29.4 per cent of the total credit facility, while $6.25bn or 70.6 per cent, remains outstanding. Also, out of the $8.86bn credit facility, only about $6.97bn has been received from seven crude-for-loan deals, as of December 2023.
However, state governments, through their commissioners of finance, are demanding an audit of these deals.
The demand was contained in a communiqué issued at the end of the 2026 retreat of the Federation Account Allocation Committee Post-Mortem Sub-Committee, obtained by The PUNCH on Thursday, which stated that, “All crude oil-backed borrowing arrangements should be subjected to legislative approval, full disclosure, and independent audit. Existing arrangements should be reviewed, with forensic audits conducted to restore confidence and protect future Federation revenues.”
The communiqué followed a three-day retreat held in Enugu between February 9 and February 11, where fiscal authorities, state representatives, revenue agencies, and policy experts met to examine persistent revenue leakages affecting the Federation Account.
The retreat, which focused on “Assessing Fiscal and Sectoral Policies for Closing Revenue Leakage in the Federation Account,” was organised to critically assess fiscal frameworks and administrative practices affecting federal revenue collections and distribution to the three tiers of government.
According to the communiqué, the meeting was convened by the FAAC Post-Mortem Sub-Committee to “critically assess fiscal and sectoral policies contributing to revenue leakage in the Federation Account and to reposition the Sub-Committee for a more proactive revenue assurance role.”
The retreat was formally opened by the Governor of Enugu State, Dr Peter Mbah, who was represented by the Secretary to the State Government, Prof Chidiebere Onyia. In his goodwill message, Onyia welcomed participants and reaffirmed the importance of fiscal coordination and transparency in managing public finances.
He also emphasised the need for stronger accountability mechanisms in the management of Federation revenues, while commending the FAAC Post-Mortem Sub-Committee and the Revenue Mobilisation Allocation and Fiscal Commission for their efforts to strengthen public finance governance in the country.
The communiqué indicated that the welcome address was delivered by the Chairman of the FAAC Post-Mortem Sub-Committee, Abdulazeez King.
Goodwill messages were also delivered by the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission, Dr Mohammed Shehu, who was represented by Federal Commissioner, Ntufam Whiley.
The former Minister of State for Finance, who is now the Minister of State for Budget, Dr Doris Uzoka-Anite, and the Permanent Secretary of the Federal Ministry of Finance, Mr Raymond Omachi, were represented at the event by Dr Ali Mohammed, Director of Home Finance.
A keynote address on the theme of the retreat was delivered by the Accountant-General of the Federation, Mr Shamseldeen Ogunjimi, who was represented by Mrs Rita Okolie, Director of the Federation Account at the Office of the Accountant-General of the Federation.
Participants at the retreat included representatives of the Federal and State Governments, revenue-generating agencies, oversight institutions, and technical experts.
According to the communiqué, deliberations during the sessions were enriched by presentations covering a broad range of fiscal governance issues, including the Federation Account framework, reforms in the petroleum sector, tax policy changes, audit oversight, crude oil-backed borrowing, and administrative practices affecting government revenue inflows.
Participants at the retreat reaffirmed the constitutional importance of the Federation Account as the central pool through which revenue is shared among the three tiers of government.
The communiqué noted that the account, established under Section 162 of the 1999 Constitution, “remains the backbone of fiscal sustainability for the three tiers of government.”
However, it warned that several structural challenges continue to erode the volume of distributable revenues available to the Federal Government, states, and local governments.
The communiqué stated that participants unanimously observed that “persistent revenue leakages, opaque deductions, institutional inefficiencies, and weak oversight continue to erode distributable revenues.”
The retreat also expressed concern over the increasing scale of quasi-fiscal deductions from Federation revenues. These deductions, according to participants, include power sector subsidy obligations, debt write-offs, and operational expenses deducted at source before revenue is remitted into the Federation Account.
The communiqué stated that these practices were widely viewed as inconsistent with the principles of transparency and fiscal discipline.
It said, “The retreat noted with concern the growing scale of quasi-fiscal deductions from Federation revenues, including power-related subsidy obligations, debt write-offs, and operational costs deducted at source. These practices were considered inconsistent with transparency, budgetary discipline, and constitutional intent.”
Participants also examined the implications of the Petroleum Industry Act and its impact on the management of oil and gas revenues. While acknowledging that the legislation has created opportunities for improved governance in the petroleum sector, the retreat raised concerns about certain operational practices under the new framework.
According to the communiqué, participants noted that issues surrounding the transfer of joint venture assets to NNPC Limited, management fees, production sharing contract profit oil administration, and the Frontier Exploration Fund had raised serious concerns among stakeholders.
“These developments were observed to have materially reduced inflows into the Federation Account and weakened oversight,” the communiqué stated.
The retreat further stressed the importance of transparency, accountability, and stronger oversight mechanisms in the management of public finances. Participants agreed that unrestricted access to Federation Account data by oversight institutions was essential for effective monitoring and recovery of government revenues.
The communiqué stated, “Transparency, accountability, and oversight are indispensable to closing revenue leakages. It was resolved that unrestricted access to Federation Account data by oversight institutions, particularly the Office of the Auditor-General for the Federation, is critical for effective monitoring, audit, and recovery of revenues.”
Participants also highlighted the role of the Supreme Audit Institution in preventing and detecting revenue leakages. The retreat emphasised the need to strengthen audit capacity and improve the timeliness of audit reporting to ensure that audit findings lead to concrete revenue recovery and deterrence against financial misconduct.
According to the communiqué, “Participants underscored the constitutional role of the Supreme Audit Institution in preventing and detecting revenue leakages. The retreat called for strengthened audit capacity, timely audit reporting, and enforceable follow-up mechanisms to ensure that audit findings translate into actual revenue recovery and deterrence.”
The meeting also raised concerns about the high cost of revenue collection by some government agencies. Participants described these costs as a major drain on the Federation Account and called for reforms to align collection charges with global best practices.
“The high cost of revenue collection by certain agencies was identified as a major drain on the Federation Account,” the communiqué said.
It added that participants resolved that cost-of-collection arrangements should be periodically reviewed and benchmarked against international standards. The retreat also welcomed ongoing tax reforms aimed at expanding the tax base and improving compliance across the country.
Participants noted that the reforms could significantly boost government revenue if implemented effectively. The communiqué stated that tax reforms should focus on strengthening compliance mechanisms and reducing fragmentation within the tax system.
Another major area of concern discussed at the retreat was the growing reliance on crude oil-backed borrowing and crude-for-product swap arrangements. The communiqué specifically mentioned arrangements such as Project Gazelle and the Direct Sale Direct Purchase scheme.
It stated that participants expressed “grave concern over crude oil-backed borrowing arrangements and opaque crude-for-product swaps, including Project Gazelle and the Direct Sale Direct Purchase scheme.”
The retreat noted that such arrangements could reduce transparency in revenue flows and weaken accountability in the management of oil revenues. It was, therefore, recommended that any future crude-backed financing arrangements must receive legislative approval and be subject to full disclosure and independent audits.
Participants also called for stronger collaboration between RMAFC and NNPC Limited to ensure proper accounting for oil revenues. The communiqué recommended that RMAFC should intensify engagement with the national oil company to obtain complete documentation relating to joint venture asset transfers and to compute net revenues due to the Federation.
It said the commission should also pursue appropriate recovery actions where discrepancies are identified.
The PUNCH earlier reported that about 14.66 per cent of Nigeria’s crude oil production in 2025 was likely committed to servicing crude-backed loan facilities, based on estimates derived from disclosures in the Nigerian National Petroleum Company Limited’s 2024 financial statements and official production data.
An analysis by The PUNCH shows that four major crude-secured arrangements — Project Gazelle, Project Yield, Project Leopard, and Eagle Export Funding — are backed by a combined 213,000 barrels of crude oil per day.
If this allocation remained unchanged throughout 2025, the total volume committed to debt servicing would amount to 77.75 million barrels for the year, calculated by multiplying 213,000 barrels per day by 365 days.
Data from the Nigerian Upstream Petroleum Regulatory Commission indicate that Nigeria produced 530.41 million barrels of crude oil between January and December 2025.
The 77.75 million barrels tied to crude-for-loan arrangements therefore represent 14.66 per cent of total annual production. Using the 2025 average Bonny Light price of $72.08 per barrel, the 77.75 million barrels translate to about $5.60bn.
Converted at the official exchange rate of N1,492 to the dollar, the crude potentially deployed to service the loans is valued at approximately N8.36tn. This implies that out of the estimated gross crude oil earnings for 2025, a sizeable portion of output by volume was effectively earmarked for debt servicing before revenues could fully accrue to government coffers.
The obligations span multiple forward-sale and project-financing arrangements expected to be serviced through substantial crude oil and gas deliveries. These commitments have become a central pillar of NNPC’s funding framework following years of fiscal strain, volatile production, and declining upstream investment.
Several of the facilities were used to refinance legacy debts, fund refinery rehabilitation, support cash flow, and meet government revenue obligations.
The Chief Executive Officer of AHA Strategies, Mr Ademola Adigun, earlier linked declining oil earnings to opaque crude-for-cash arrangements and undisclosed loan repayments that have tied up part of the country’s output.
“Some of our crude is already tied up in loan agreements. The problem is that Nigeria doesn’t know the full details of these transactions because there’s little transparency around them,” Adigun said.
He added that several crude-backed projects, including Project Gazelle, were executed without adequate public disclosure or parliamentary scrutiny, urging the Nigeria Extractive Industries Transparency Initiative to strengthen its audits.
Development economist and Chief Executive Officer of CSA Advisory, Dr Aliyu Ilias, said Nigeria’s crude trading structure had grown increasingly complex, involving swaps and oil-to-naira transactions that might not be fully captured in official records.
The Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, recalled that during the tenure of former Central Bank Governor, Godwin Emefiele, several forward-sale deals were signed to raise emergency funds amid fiscal pressure.
“During the Emefiele years, Nigeria committed a lot of its crude upfront,” he said. “Those forward sales are still eating into our current earnings.”
Yusuf, however, noted that transparency and professionalism within the NNPCL had improved under the current administration of Bayo Ojulari. “Under the new management of the NNPC, there’s better professionalism and openness,” he said.
He added that full disclosure of crude swap and forward-sale agreements is necessary to restore confidence in oil revenue reporting.
The Chief Corporate Communications Officer of NNPC Limited, Andy Odeh, had not responded to enquiries sent to him regarding the crude-for-loan arrangements as of the time this report was filed.
