KEY POINTS
- NNPCL received N318bn for frontier oil exploration.
- PSC profits fell short of budget targets.
- Federation Account revenues face widening shortfalls.
The Nigerian National Petroleum Company Limited has received N318.05 billion between January and August 2025 to finance frontier oil exploration, according to documents from the September meeting of the Federation Account Allocation Committee.
The inflows reflect 30 percent deductions from Production Sharing Contract profits, a mechanism created under the Petroleum Industry Act of 2021 to fund exploration in underdeveloped inland basins.
Frontier oil exploration fund builds momentum
The Petroleum Industry Act mandated the creation of a Frontier Exploration Fund, requiring 30 percent of NNPCL’s Production Sharing Contract profits to be reserved for oil search in basins such as Anambra, Bida, Dahomey, Sokoto, Chad, and Benue.
Regulations also stipulate that the Nigerian Upstream Petroleum Regulatory Commission manages the fund through an escrow account and publishes an annual Frontier Basin Exploration and Development Plan.
In July 2025, the NUPRC released its exploration plan outlining activities including seismic surveys, stress-field detection, and new wildcat drilling across Dahomey, Anambra, Bida, Sokoto, Chad, and Benue basins. Specific work included logging and testing of the Eba-1 well in Dahomey, drilling of a new wildcat in Bida, reappraisal of Wadi wells in Chad, and reassignment of Ebeni-1 drilling in Benue.
The plan, signed by NUPRC Chief Executive Gbenga Komolafe, stressed that results from these programs would guide further de-risking of assets and determine next steps in exploratory drilling.
PSC profits slump but deductions stay firm
Despite consistent deductions for frontier oil exploration, Production Sharing Contract profits have underperformed in 2025. FAAC data showed that profits totaled N1.06 trillion in the first eight months, well below the budgeted N1.58 trillion. That left a shortfall of N518.76 billion.
Still, the 30 percent statutory deduction was applied each month. In January, N31.77 billion went into the fund when PSC profits stood at N105.91 billion. February saw N38.30 billion transferred, a 20.6 percent increase from January. The March allocation surged to N61.49 billion as profits climbed to N204.96 billion.
April reversed the trend, with deductions dropping to N36.58 billion as profits declined sharply to N121.93 billion. May brought N38.8 billion, only a slight recovery, followed by June’s steep fall to just N6.83 billion, the lowest allocation so far.
July showed a partial rebound with N25.34 billion, before August hit the year’s peak. With profits climbing to N263.13 billion, the frontier fund received N78.94 billion, twelve times June’s contribution.
These swings meant allocations varied widely, from as little as N6.83 billion in June to as much as N78.94 billion in August. By August’s end, NNPCL had amassed N318.05 billion to pursue frontier oil exploration projects.
The same deduction system applied to NNPCL’s management fees, which mirrored the frontier allocations exactly, also totaling N318.05 billion. Combined, the company received N636.1 billion in the first eight months of the year.
Federation Account under pressure
The Federation Account, entitled to 40 percent of PSC profits, also reflected the volatility. January brought in N42.36 billion, rising to N51.07 billion in February, then peaking at N81.99 billion in March. April dropped to N48.77 billion, with May steady at N51.73 billion. June collapsed to N9.11 billion, the weakest inflow of the year, before rebounding to N33.79 billion in July and then surging to N105.25 billion in August.
Year-to-date, the Federation Account collected N424.07 billion, still far short of the budgeted N631.57 billion. The gap widened further due to NNPCL’s failure to remit any interim dividends, which had been budgeted at N2.17 trillion by August.
According to Punch, the FAAC documents showed the missed dividends and frontier deductions together left government revenues well below projections. A special FAAC subcommittee has since been tasked with reviewing the statutory deductions. In meetings with NNPCL, the Nigerian Upstream Petroleum Regulatory Commission, and the Central Bank of Nigeria, the company provided a history of exploration efforts across inland basins since 1999 and laid out its intended programs for 2025.
