The Nigerian National Petroleum Company Limited (NNPCL) has secured ₦318.05 billion between January and August 2025 to fund frontier oil exploration across the country’s inland basins, raising fresh questions about transparency, sustainability, and the economic wisdom of such large deductions amid Nigeria’s deepening revenue crisis.
The funding stems from a statutory 30% deduction from Production Sharing Contract (PSC) profits, as mandated by the Petroleum Industry Act (PIA) 2021, which channels significant resources into oil search projects in underexplored regions such as Anambra, Bida, Dahomey, Sokoto, Chad, and Benue.
NNPCL Diverts Billions Amid Revenue Shortfalls
According to documents from the September 2025 Federation Account Allocation Committee (FAAC) meeting, the deductions were applied consistently, even as overall oil profits underperformed this year. Month-to-month allocations swung sharply from ₦6.83 billion in June during a profit dip, to ₦78.94 billion in August when PSC profits surged to ₦263.13 billion.
In addition, NNPCL received an equal ₦318.05 billion in management fees under the same 30% formula. This means the company has amassed ₦636.1 billion in just eight months, while the Federation Account meant to fund states and federal budgets was left with ₦424.07 billion, far below the budgeted ₦631.57 billion. The ₦207 billion shortfall adds to Nigeria’s widening fiscal pressures, compounded by the oil company’s failure to remit the ₦2 trillion interim dividends projected for 2025.
What the Frontier Exploration Fund Means
The Frontier Exploration Fund, introduced under the PIA, is managed by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and designed to unlock new oil reserves. In July 2025, NUPRC unveiled a basin-wide exploration plan featuring seismic surveys, stress-field detection, and wildcat drilling.
Experts Criticize NNPCL’s Frontier Oil Spending Strategy
Ademola Adigun, CEO of AHA Strategies, dismissed the 30% allocation as “unrealistic and too high,” calling for it to be slashed to 10% or less.
Professor Dayo Ayoade, energy law expert at the University of Lagos, warned that diverting public funds into risky exploration undermines the PIA’s goal of commercializing the oil sector, urging incentives for private investors instead.
NNPCL’s Deductions Spur Push to Amend the Petroleum Industry Act
The Budget Office of the Federation has also raised concerns, revealing that Nigeria has lost nearly 60% of its gross oil revenue due to the deduction framework. Its Director-General, Tanimu Yakubu, disclosed that steps are already underway in the National Assembly to amend the PIA and reduce these outflows.
But not everyone agrees. Two major oil workers’ unions have cautioned lawmakers against altering the Act, insisting such a move could destabilize the industry and weaken NNPCL’s operational capacity.
Transparency Concerns Mount Over NNPCL’s Oil Exploration Spending
In response, FAAC has established a special subcommittee to probe the deductions, directing NNPCL to submit detailed records of all frontier exploration spending since 1999. Although the company was ordered to deliver the documents by September 19, 2025, the review remains ongoing.
As Nigeria grapples with falling revenues and rising debt, the future of frontier oil exploration hangs in the balance. Policymakers now face a defining choice: continue pouring billions into high-risk basins with uncertain returns, or recalibrate the Petroleum Industry Act to free up more oil profits for national development and public welfare.
