Decision wipes out legacy obligations owed by NNPC Ltd, signaling fiscal reset and stronger revenue coordination
President Bola Ahmed Tinubu has approved the cancellation of a significant portion of the Nigerian National Petroleum Company Limited’s (NNPC Ltd) outstanding debts to the Federation Account, effectively writing off about $1.42 billion in legacy obligations accumulated over several years.
The move, according to government sources, is aimed at easing longstanding financial pressures on the Federation Account and strengthening fiscal coordination between the federal government, states, local governments, and key revenue-generating agencies. The cleared liabilities were linked to past fuel subsidy-related transactions and other legacy financial commitments inherited by NNPC Ltd.
By approving the debt cancellation, the Tinubu administration is seeking to reset the financial relationship between NNPC Ltd and the Federation, allowing the national oil company to operate with a cleaner balance sheet while improving transparency in revenue remittances. Analysts say the decision could enhance NNPC Ltd’s capacity to meet its current obligations and improve cash flow to the three tiers of government.
The development comes amid broader economic reforms by the federal government, including subsidy removal, exchange rate adjustments, and efforts to boost non-oil revenue. Officials believe that resolving historical debts will help prevent recurring disputes over remittances and create a more predictable fiscal environment.
NNPC Ltd, now operating as a commercial entity under the Petroleum Industry Act (PIA), has faced scrutiny over remittances in recent years. The debt clearance is expected to support the company’s transition into a profit-driven organization while aligning it more closely with national economic reform goals.
Financial experts note that while the debt write-off may reduce immediate inflows to the Federation Account, it could deliver longer-term benefits by stabilizing public finances, improving accountability, and restoring confidence in Nigeria’s oil and gas sector governance.
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