According to a report, the Nigerian National Petroleum Company Limited (NNPCL ) was awarded N318.05 billion for frontier oil exploration between January and August 2025.
Documents from the September 2025 Federation Account Allocation Committee meeting was able to collect support this claim.
30% of the income from Production Sharing Contracts, which are automatically set aside each month for inland basin exploration, are represented by the deductions.
The Frontier Exploration Fund was established by the Petroleum Industry Act of 2021, and it requires that 30% of the earnings from NNPC’s Production Sharing Contracts go towards oil exploration in underdeveloped basins such as Anambra, Bida, Dahomey, Sokoto, Chad, and Benue.
According to regulations, the Nigerian Upstream Petroleum Regulatory Commission must also publish an annual Frontier Basin Exploration and Development Plan and oversee the fund through an escrow account.
According to additional information obtained , the NUPRC announced a Frontier Basin Exploration and Development Plan in July 2025 that included plans for seismic surveys, data integration, stress-field detection, and wildcat drilling spanning basins in Benin Dahomey, Anambra, Bida, Sokoto, Chad, and Benue.
Work including logging and testing the Eba-1 well in the Dahomey basin, drilling a new wildcat in Bida, reevaluating the Wadi wells in Chad, and reassigning the Ebeni-1 drilling in Benue were all included in the plan.
The paper, which was signed by Gbenga Komolafe, the Chief Executive of the NUPRC, said that the results of these efforts would define additional asset de-risking and exploratory drilling in accordance with legal standards.
Further examination of the FAAC papers revealed that PSC’s profits for the year to far was N1.06 trillion, which is less than the N1.58 trillion budgeted, leaving a N518.76 billion deficit.
Notwithstanding this discrepancy, the compulsory 30% deduction for frontier exploration was regularly applied month after month, resulting in a total of N318.05 billion by August.
The fund’s volatility is seen by the monthly trend. When PSC’s profits in January totalled N105.91 billion, N31.77 billion was subtracted from the frontier line.
The fund received N38.8 billion in May, which was only marginally higher than April’s contribution, reflecting profit of N129.33 billion. June delivered the lowest allocation so far this year, just N6.83 billion, after profits collapsed to N22.77 billion, representing an 82.4 percent fall from May.
The flow recovered somewhat in July, with N25.34 billion transferred into the fund from profits of N84.48 billion. The February deduction increased to N38.30 billion from a profit of N127.67 billion,
The queue surged once again in August, reaching its biggest point of the year. The fund got N78.94 billion, more than three times the July amount and twelve times the June contribution, as a result of PSC’s profit spike to N263.13 billion.
The monthly contributions to the frontier fund fluctuated greatly over the course of the eight months, ranging from as low as N6.83 billion in June to as high as N78.94 billion in August.
The automatic deductions, however, had gradually accrued N318.05 billion by the conclusion of the year, which NNPCL now controls for exploration in new oil basins.
NNPCL’s management fees were subject to the same 30% rule, which was an identical replica of the frontier deductions.
NNPCL booked N31.77 billion in January, N38.30 billion in February, N61.49 billion in March, N36.58 billion in April, N38.8 billion in May, N6.83 billion in June, N25.34 billion in July, and N78.94 billion in August.
In the first eight months of the year, this resulted in N318.05 billion in management fees for the corporation.
The oil company received N636.1 billion in total for frontier exploration and management fees, according to the numbers.
It was also noted that the similar volatility was seen in the Federation Account, which is entitled to 40% of PSC income.
In January, it got N42.364 billion, while in February, it got N51.067 billion. The biggest inflow of the first quarter, N81.985 billion, came in March.
It dropped to N48.772 billion in April and N51.730 billion in May. At N9.110 billion, June’s result was the lowest of the year.
Revenues increased once more to N33.792 billion in July before sharply increasing to N105.250 billion in August, the biggest monthly payout to date.
The Federation Account has received N424.071 billion from PSC profits so far this year, which is still far less than the N631.573 billion that was projected, leaving a N207.502 billion shortfall.
Even though PSC profits this year were slightly over N1.06 trillion, the deductions left the Federation Account with far less to distribute to the three levels of government, according to FAAC documents.
The strain has been made worse by NNPCL’s interim dividend line’s poor performance.
With a monthly budget of N271.184 billion, or N2.169 trillion, the corporation has yet to make any payments, creating a huge deficit in the federation’s income forecast.
The problem has drawn more attention. A special panel was established to look into the 30% frontier deductions, according to FAAC papers.
The group held meetings with the Central Bank of Nigeria, the Nigerian Upstream Petroleum Regulatory Commission, and NNPCL.
During the discussion, NNPCL provided an overview of its planned activities until 2025 as well as specifics of the exploration work done in each of the inland basins since 1999.
However, committee members insisted on further openness and asked NNPCL to furnish comprehensive financial records of projects that were carried out both before and after the Petroleum Industry Act was implemented.
Although the documentation stated that the assignment was still “work in progress,” the organisation was instructed to produce the material by September 19, 2025.
Nigeria has lost almost 60% of its gross oil revenue due to deductions under the Petroleum Industry Act 2022, which gives 30% to the NNPCL as management fees and another 30% to the Frontier Exploration Fund, according to a previous statement by Tanimu Yakubu, Director-General of the Federation’s Budget Office.
He said this during a stakeholders’ meeting held in Abuja by the Federation’s Office of the Accountant-General to discuss the difficulties and advancements in executing the Bottom-Up Cash Planning Policy’s extended 2024 and 2025 capital budgets.
“We lost a significant portion of what used to fund 80% of public expenditures once the Act went into effect without new revenue sources to make up the loss,” Yakubu stated.
He went on to say that because of low pricing and output shortages, oil revenues have done even worse in the first half of 2025.
Yakubu claimed to have started the process of amending the PIA in order to recoup a portion of the lost revenue in the National Assembly.
President Bola Tinubu ordered a review of the deductions and income retention policies of Nigeria’s main revenue-generating agencies during the Federal Executive Council meeting in Abuja last month.
The action seeks to increase public savings, improve the effectiveness of spending, and release resources for expansion.
The Nigerian National Petroleum Company Limited, the Nigerian Upstream Petroleum Regulatory Commission, the Nigerian Maritime Administration and Safety Agency, the Nigeria Customs Service, and the Federal Inland Revenue Service are among the organisations.
In particular, Tinubu demanded that NNPC’s 30% management fee and 30% frontier exploration deduction under the Petroleum Industry Act be reevaluated.
He gave the Economic Management Team, led by Edun, the responsibility of providing the FEC with practical suggestions regarding the best course of action.
The decision, according to the president, is a component of ongoing reforms that have eliminated economic distortions, improved resilience, restored policy legitimacy, and increased investor confidence.
However, the Federal Government’s proposals to sell off sizable shares in Joint Venture assets run by the Nigerian National Petroleum Company Limited were rejected by the Nigeria Union of Petroleum and Natural Gas Workers and the Petroleum and Natural Gas Senior Staff Association of Nigeria.
The plan to purportedly change the Petroleum Industry Act and remove the running of petrol and oil from the NNPCL might risk worker welfare, undermine the nation’s oil industry and threaten economic stability, the two unions warned.
They said that the policies are risky and have the potential to cause the Nigerian National Petroleum Company Limited to go bankrupt.
President Bola Tinubu was urged by the oil workers to step in and put an end to the plot.
Experts seek deductions
The 30% allotment of Production Sharing Contract earnings to frontier oil development has been criticised by Mr. Ademola Adigun, the Chief Executive Officer of AHA Strategies, a specialist in oil and gas, as being “unrealistic and too high.”
Adigun said the current arrangement was not justified under the current economic situation after it was revealed that NNPCL had received N318.05 billion for frontier exploration in just eight months without paying dividends to the Federation Account.
“The amount of money allotted is excessively high and impractical. It’s not being utilised very often these days,” he said.
He insisted that more money go into the Federation Account and supported President Bola Tinubu’s request for a review of the deductions made by significant revenue agencies, such as NNPCL. Adigun went on, “I don’t think it’s worth it to continue this way.”
The industry expert suggested that the frontier allotment be severely reduced, with a maximum of 10%.
“I would recommend a maximum of 10 percent,” he stated.
Professor Dayo Ayoade, an energy law expert at the University of Lagos, has warned against a hurried change to the Petroleum Industry Act, pointing out that it took almost 20 years of discussions and compromises to enact.
“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 remarked in response to the frontier deduction revelations. In many respects, the Host Community Trust Fund was balanced by the Frontier Exploration Fund.
Ayoade acknowledged Nigeria’s pressing need for funding, but he requested that NNPCL provide a thorough breakdown of the funds it has raised for frontier exploration.
“I knew that 30% of PSC profits going into just exploration was too high, so it was one of my biggest issues with the PIA.” He clarified, “I would prefer that exploration be liberalised and placed in the hands of the private sector.”
Instead of the government employing public funding through NNPCL, he proposed offering robust financial and operational incentives to private investors that are ready to assume the risk of exploring frontier basins.
“This project should not be funded by the government through any NNPCL,” Ayoade continued.
The researcher also cautioned that NNPCL’s commercial credibility was weakened and fiscal federalism was at risk due to the current funding mechanism.
The truth is that the financial arrangement is not truly sustainable. In reality, NNPCL is not a commercial enterprise. He maintained that the corporation should be evaluated based on the profits made from its own fields and operations rather than joint ventures or production sharing agreements, arguing that it only serves as a middleman for the government and collects money it hasn’t actually earned.
