The Nigerian National Petroleum Company Limited (NNPCL) has received ₦318.05 billion between January and August 2025 for frontier oil exploration activities, according to documents from the September 2025 Federation Account Allocation Committee (FAAC) meeting.
The amount represents 30 per cent of profits from Production Sharing Contracts (PSC), which are statutorily deducted each month and channelled into the Frontier Exploration Fund. The fund, established under the Petroleum Industry Act (PIA) 2021, is intended to finance exploration in Nigeria’s under-explored inland basins, including Anambra, Bida, Benue, Chad, Dahomey, and Sokoto.
Documents obtained by New Daily Prime indicate that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is responsible for managing the fund through an escrow account and must present an annual Frontier Basin Exploration and Development Plan. In July 2025, the NUPRC unveiled a new plan detailing proposed seismic surveys, stress-field detection, and wildcat drilling across the target basins.
The plan includes logging and testing of the Eba-1 well in the Dahomey Basin, drilling of a wildcat well in the Bida Basin, reassessment of the Wadi wells in Chad, and reassignment of Ebeni-1 drilling in the Benue Basin. The NUPRC noted that the outcome of these activities would determine future investment and drilling strategies.
Despite PSC profits falling short of expectations, ₦1.06 trillion so far this year, compared to the budgeted ₦1.58 trillion, NNPCL’s 30 per cent allocation was consistently applied, month after month. The deductions peaked in August at ₦78.94 billion, the highest monthly figure, following a surge in PSC profits to ₦263.13 billion.
Monthly allocations fluctuated widely: ₦31.77 billion in January, ₦38.30 billion in February, ₦61.49 billion in March, ₦36.58 billion in April, ₦38.80 billion in May, ₦6.83 billion in June, and ₦25.34 billion in July.
A corresponding 30 per cent deduction was also applied to NNPCL’s management fees, bringing total receipts to ₦636.1 billion for the period—₦318.05 billion for frontier exploration and another ₦318.05 billion as management fees.
Meanwhile, the Federation Account, which is entitled to 40 per cent of PSC profits, received ₦424.07 billion between January and August—far short of the ₦631.57 billion target—due to declining oil revenues and high deductions.
Compounding the situation, NNPCL has failed to remit any of its budgeted interim dividend of ₦2.169 trillion for the year. The shortfall has raised concerns within government circles, prompting FAAC to establish a special subcommittee to investigate the 30 per cent deductions.
At a recent meeting involving NNPCL, NUPRC, and the Central Bank of Nigeria, the oil firm presented its exploration activities since 1999 and its 2025 plans. However, FAAC members demanded greater transparency and directed the company to submit detailed financial records by 19 September. As of the latest update, the task remains “work in progress.”
The Director-General of the Budget Office, Tanimu Yakubu, warned earlier this year that Nigeria had lost nearly 60 per cent of its gross oil revenue to PIA-related deductions. Speaking at a stakeholders’ meeting in Abuja, he said, “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.”
He noted that oil revenues underperformed in the first half of 2025, citing low prices and reduced output. Yakubu is reportedly pursuing amendments to the PIA in the National Assembly to recover lost revenue.
President Bola Tinubu has also ordered a review of revenue retention practices across major government agencies, including the NNPCL. During the August Federal Executive Council meeting, Tinubu called for a reassessment of the 30 per cent management and exploration deductions, directing the Economic Management Team to develop actionable recommendations.
While some experts have supported the review, others have urged caution. Oil and gas analyst Ademola Adigun described the 30 per cent allocation as “unrealistic and too high”, recommending it be cut to a maximum of 10 per cent.
Conversely, Professor Dayo Ayoade, an energy law scholar at the University of Lagos, warned against a hasty amendment of the PIA. “It took us 19 years of reform to agree on the PIA, and the PIA is actually a delicate balance of a lot of compromises,” he said, adding that the current funding model poses risks to fiscal sustainability and undermines the commercial independence of NNPCL.
Ayoade further argued that private sector players, rather than the government, should bear the cost of frontier exploration, supported by incentives.
Meanwhile, the Petroleum and Natural Gas Senior Staff Association of Nigeria and the Nigeria Union of Petroleum and Natural Gas Workers have opposed government plans to amend the PIA and divest Joint Venture assets. They warned that the proposed policies could destabilise the oil sector and bankrupt the NNPCL, urging President Tinubu to intervene.
As debates continue, the future of Nigeria’s oil revenue framework, including the fate of the 30 per cent deductions, remains a central issue in the country’s fiscal policy discussions.
