The Nigerian National Petroleum Company Limited (NNPCL) has received ₦318.05 billion between January and August 2025 for frontier oil exploration.
This is according to documents from the September 2025 Federation Account Allocation Committee (FAAC) meeting.
The deductions represent 30 per cent of Production Sharing Contract profits, which are automatically set aside each month for exploration in inland basins.
The Petroleum Industry Act 2021 created the Frontier Exploration Fund, which mandates that 30 per cent of profits from NNPC’s Production Sharing Contracts be channelled into oil search across under-explored basins, including Anambra, Bida, Dahomey, Sokoto, Chad and Benue.
Regulations also require the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to manage the fund through an escrow account and issue an annual Frontier Basin Exploration and Development Plan.
Further findings showed that the NUPRC in July 2025 unveiled a Frontier Basin Exploration and Development Plan detailing proposed seismic surveys, stress-field detection, data integration, and wildcat drilling across basins in Benin Dahomey, Anambra, Bida, Sokoto, Chad, and Benue.
The plan outlined work such as logging and testing of the Eba-1 well in the Dahomey basin, drilling of a new wildcat in Bida, reappraisal of Wadi wells in Chad, and reassignment of Ebeni-1 drilling in Benue.
Signed by the Chief Executive of the NUPRC, Gbenga Komolafe, the document stated that the outcome of these activities would determine further de-risking of assets and exploratory drilling in line with statutory requirements.
Analysis of the FAAC documents further showed that PSC profits so far this year amounted to ₦1.06 trillion, below the budgeted ₦1.58 trillion, creating a shortfall of ₦518.76 billion.
Despite this gap, the statutory 30 per cent deduction for frontier exploration was consistently applied, month after month, producing an accumulated ₦318.05 billion by August.
The monthly trend reveals the volatility of the fund. In January, ₦31.77 billion was deducted into the frontier line, when PSC profits came in at ₦105.91 billion.
The February deduction rose to ₦38.30 billion from a profit of ₦127.67 billion, representing a 20.6 per cent increase on the January inflow.
March provided the first big surge, with ₦61.49 billion allocated to frontier exploration from profits of ₦204.96 billion, a jump of 60.5 per cent on February’s figure.
April, however, saw deductions ease back to ₦36.58 billion as profits slid to ₦121.93 billion, a 40.5 per cent drop compared with March.
In May, the fund received ₦38.8 billion, only slightly higher than April’s contribution, reflecting a profit of ₦129.33 billion.
June delivered the lowest allocation so far this year, just ₦6.83 billion, after profits collapsed to ₦22.77 billion. That represented an 82.4 per cent fall from May.
The flow recovered somewhat in July, with ₦25.34 billion transferred into the fund from profits of ₦84.48 billion.
In August, the line shot up again to its highest level so far this year. With PSC profit surging to ₦263.13 billion, the fund received ₦78.94 billion, more than three times the July amount and twelve times June’s contribution.
Across the eight months, the monthly allocations to the frontier fund varied sharply, from as little as ₦6.83 billion in June to as much as ₦78.94 billion in August.
Yet by the end of the period, the automatic deductions had steadily accumulated ₦318.05 billion into NNPCL’s control for exploration in new oil basins.
The same 30 per cent rule also applied to NNPCL’s management fees, which mirrored the frontier deductions exactly.
In January, NNPCL booked ₦31.77 billion; in February, ₦38.30 billion; in March, ₦61.49 billion; in April, ₦36.58 billion; in May, ₦38.8 billion; in June, ₦6.83 billion; in July, ₦25.34 billion; and in August, ₦78.94 billion.
This brought the company’s management fees to ₦318.05 billion in the first eight months of the year.
Based on the figures, the oil firm got a total of ₦636.1 billion for frontier exploration and management fees.
The Federation Account, entitled to 40 per cent of PSC profits, also experienced the same volatility.
It received ₦42.364 billion in January and ₦51.067 billion in February. March brought ₦81.985 billion, the strongest inflow of the first quarter.
April saw a fall to ₦48.772 billion, followed by ₦51.730 billion in May. June gave the lowest figure of the year at ₦9.110 billion.
In July, receipts rose again to ₦33.792 billion, before climbing steeply to ₦105.250 billion in August, the largest monthly payout so far.
Year-to-date, the Federation Account has received ₦424.071 billion from PSC profits, still well behind the budgeted ₦631.573 billion, leaving a shortfall of ₦207.502 billion.
The FAAC documents confirmed that while PSC profits generated just over ₦1.06 trillion this year, the deductions left the Federation Account with significantly less to share among the three tiers of government.
The pressure has been compounded by the non-performance of NNPCL’s interim dividend line.
Budgeted at ₦271.184 billion per month, or ₦2.169 trillion year-to-date, the company has not remitted any amount so far, leaving a gaping hole in the federation’s revenue plan.
The issue has prompted closer scrutiny. The FAAC documents record that a special subcommittee was set up to examine the 30 per cent frontier deductions.
The committee met with NNPCL, the NUPRC, and the CBN.
At the meeting, NNPCL presented details of exploration activities carried out in all the inland basins from 1999 to date and outlined its intended activities for 2025.
Committee members, however, demanded greater transparency, insisting that NNPCL provide detailed financial records of projects undertaken before and after the Petroleum Industry Act was passed.
The company was directed to submit the information by September 19, 2025, but the documents noted that the assignment was still “work in progress.”
The Director-General of the Budget Office of the Federation, Tanimu Yakubu, earlier said Nigeria had lost nearly 60 per cent of its gross oil revenue to deductions under the Petroleum Industry Act 2022, which allocates 30 per cent to the NNPCL as management fees and another 30 per cent to the Frontier Exploration Fund.
He made this statement at a stakeholders’ engagement in Abuja, organised by the Office of the Accountant-General of the Federation, to review progress and challenges in implementing the extended 2024 capital budget and the 2025 capital budget under the Bottom-Up Cash Planning Policy.
“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 said.
He added that oil revenues had performed even worse in the first half of 2025 due to low prices and output shortfalls.
Yakubu said he had begun moves in the National Assembly to amend the PIA to recover part of the lost revenue.
During the Federal Executive Council meeting in Abuja last month, President Bola Tinubu directed a review of deductions and revenue retention practices by Nigeria’s major revenue-generating agencies.
The move aims to boost public savings, enhance spending efficiency, and unlock resources for growth.
The agencies include the Federal Inland Revenue Service (FIRS), the Nigeria Customs Service (NCS), the NUPRC, the Nigerian Maritime Administration and Safety Agency (NIMASA), and the NNPCL.
Tinubu specifically called for a reassessment of NNPCL’s 30 per cent management fee and 30 per cent frontier exploration deduction under the Petroleum Industry Act.
He tasked the Economic Management Team, chaired by Edun, to present actionable recommendations to the FEC on the optimal way forward.
The President said the directive was part of efforts to sustain reforms that have dismantled economic distortions, restored policy credibility, enhanced resilience, and bolstered investor confidence.
However, the Petroleum and Natural Gas Senior Staff Association of Nigeria, as well as the Nigeria Union of Petroleum and Natural Gas Workers, rejected the Federal Government’s plans to divest significant stakes in Joint Venture assets managed by the NNPCL.
The two unions warned that the move to allegedly amend the Petroleum Industry Act and remove the running of oil and gas from the NNPCL could endanger the country’s economic stability, weaken its oil industry, and jeopardise the welfare of workers.
They stated that the policies are dangerous and capable of bankrupting the Nigerian National Petroleum Company Limited.
The oil workers urged President Bola Tinubu to intervene and halt the plan.
Experts seek deductions
The Chief Executive Officer of AHA Strategies, who is an oil and gas expert, Mr Ademola Adigun, has faulted the 30 per cent allocation of Production Sharing Contract profits to frontier oil exploration, describing it as “unrealistic and too high.”
Reacting to revelations that NNPCL received ₦318.05 billion for frontier exploration in just eight months without paying dividends to the Federation Account, Adigun said the current arrangement was not justifiable under prevailing economic conditions.
“The money allocation is unrealistic, too high. It is not well used now,” he stated.
He backed President Bola Tinubu’s call for a review of deductions by major revenue agencies, including NNPCL, insisting that more revenue should flow into the Federation Account. “I don’t think it’s worth it to continue this way,” Adigun added.
The industry expert recommended that the frontier allocation be cut drastically, proposing that it should not exceed 10 per cent.
“Maximum of 10 per cent is what I would suggest,” he said.
However, an energy law scholar at the University of Lagos, Professor Dayo Ayoade, has cautioned against a hasty amendment of the Petroleum Industry Act, stressing that the law took nearly two decades of negotiations and compromises before it was passed.
Reacting to the revelations on frontier deductions, he said, “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. The Frontier Exploration Fund, in many ways, was like a counterbalance to the Host Community Trust Fund.”
While acknowledging Nigeria’s urgent revenue needs, Ayoade insisted that NNPCL must give a detailed account of the money it has collected for frontier exploration.
“It was one of the biggest problems I had with the PIA because I knew that 30 per cent of PSC profits going into just exploration was too high. I would rather that exploration be liberalised and put in the hands of the private sector,” he explained.
He suggested that private investors willing to take the risk of exploring frontier basins should be offered strong tax and operational incentives, instead of the government using public funds through NNPCL.
“There should not be any NNPCL spending government money on this project,” Ayoade added.
The scholar also warned that the current funding model posed risks to fiscal federalism and undermined NNPCL’s commercial credibility.
“The funding structure is not really sustainable, and that is the truth. NNPCL is not really a commercial company. All it does is act as a middleman for government and collect money it has not really earned,” he argued, adding that the company should be judged by profits generated from its own fields and operations rather than from joint ventures or production sharing arrangements.
The PUNCH
