Oil revenue reels as NNPC remittance to FAAC drops by 86%

Nigeria’s oil revenue fell sharply in 2025, owing to the Nigerian National Petroleum Company’s (NNPC) failure to deliver up to 86 percent of the promised revenue to the federal government’s coffers, exposing the fragility of Nigeria’s oil-dependent economy.

The state-owned oil company remitted just N604.61bn to the Federation Account Allocation Committee between January and December 2025, representing an 86 per cent shortfall against the budgeted N4.20 trillion, according to Federal Allocation Account Committee documents reviewed by Agora Policy.

The revenue collapse extends beyond underperformance in production-sharing contracts.

Data also showed the anticipated N3.25 trillion interim dividend, which government planners had embedded into federal spending projections, failed to materialise entirely, compounding the fiscal crisis facing Abuja as it struggles to meet obligations across infrastructure, healthcare, and social services.

“When your largest revenue contributor misses targets by this magnitude, every aspect of government function, from infrastructure to healthcare, faces existential funding gaps,” Chinedu Uzordike, senior energy analyst at Sofidam Capital, said.

The shortfall has profound implications for a government already grappling with mounting debt servicing costs and escalating security expenditure across multiple theatres of conflict in the northeast, northwest, and southeast regions.

NNPC’s production-sharing contract revenues from profit oil yielded N604.61 billion against a N947.36 billion target, representing a 36 percent underperformance.

Yet this pales in comparison to the complete disappearance of dividend payments, which alone accounted for 77 percent of the total budgeted contribution.

The dividend debacle raises uncomfortable questions about NNPC’s profitability and operational efficiency since its controversial transformation from a state corporation to a limited liability company in 2022. The restructuring, championed by former President Muhammadu Buhari, promised to deliver commercial discipline and enhanced returns to shareholders, principally the Nigerian government.

Monthly production data reveal a volatile pattern that rarely approaches sustainability. The company generated N1.51tn in profit across the year, falling far short of the cumulative monthly target of N197.37bn per month, which would have totalled N2.37tn annually.

August and September marked the year’s peak performance, with profit reaching N263.13bn and N275.38bn, respectively, the only months to significantly exceed the monthly target. However, these gains evaporated in the final quarter as production plummeted dramatically.

October delivered a meagre N36.82bn, November managed N112.32bn, whilst December closed at a dismal N26.82bn, barely 14 per cent of the monthly target. The June nadir, when profitability collapsed to N22.77bn, less than 12 per cent of the monthly target, raised serious questions about operational capacity and infrastructure challenges plaguing Nigeria’s oil sector.

Industry analysts attribute the production volatility to multiple factors, such as persistent crude oil theft in the Niger Delta, ageing infrastructure requiring substantial capital investment, regulatory uncertainties deterring international partners, and underinvestment in exploration and production activities over the past decade.

Nigeria’s crude oil production has languished below its Organisation of Petroleum Exporting Countries quota for years, with the country repeatedly requesting quota adjustments downward to reflect production realities rather than aspirations. The nation that once pumped over 2m barrels per day now struggles to consistently exceed 1.5m barrels.

“The infrastructure decay is real and significant. You cannot reverse decades of underinvestment overnight, even with the best management,” observed an oil and gas consultant familiar with NNPC’s operations. “Add crude theft, pipeline vandalism, and community unrest, and you have a perfect storm undermining production.”

The revenue crisis has immediate implications for Nigeria’s federal structure, which distributes oil revenues among federal, state, and local governments through the Federation Account. States heavily dependent on federal allocations face severe cash crunches, affecting salary payments, infrastructure projects, and service delivery.

The situation has intensified pressure on President Bola Tinubu’s administration, which assumed office in May 2023, promising economic renewal and fiscal reforms. The government has removed fuel subsidies, floated the naira, and pursued tax reforms, yet oil revenue threatens to undermine these stabilisation efforts.

Wale Edun, minister of finance, has repeatedly emphasised diversification away from oil dependence, pointing to improvements in non-oil revenues, including customs duties and company income tax collections.

However, oil revenues remain critical to foreign exchange generation and fiscal stability, accounting for approximately 50 per cent of government revenues despite economic diversification rhetoric.

NNPC’s performance stands in stark contrast to international oil companies operating in Nigeria, many of which have divested from onshore assets to focus on deepwater production, where security challenges prove less acute.

These operators continue meeting production targets and remitting taxes and royalties, albeit from a diminishing asset base as divestments accelerate.

Efforts to reach NNPC for comment on the revenue performance and dividend payment failure were unsuccessful at press time. (BusinessDay)