NNPC's N11.2tn claim on the Federation is a year-end balance, and its total claims fell from N17.51tn after N8.67tn of energy security costs were netted off

NNPC Ltd has published its 2025 Annual Financial Report, which contains the audited consolidated and separate financial statements for the year ended 31 December 2025. Reports this week, among them one headlined "NNPC records N11.2tn Federation claims for oil and gas security costs", rest on one line in those statements. We downloaded the 164-page report from NNPC's investor page and read the notes the figure comes from: Note 24 on trade and other receivables (printed page 105), Note 24.2 on receivables from the Federation (page 106) and Note 20 on royalties (page 101).

Note 24 lists "Receivables from Federation" of N11,201,028 million for the Group at 31 December 2025, against N17,512,046 million a year earlier. It sits beside trade receivables of N4,625,409 million, related party receivables of N100 million and other receivables of N4,777,993 million. The four lines add to N20,604,530 million, and after an impairment allowance of N2,335,585 million the total is N18,268,945 million, as printed.

Note 24.2 splits the figure. It opens: "Receivables from the Federation relates to costs incurred by the Group on behalf of the Federation." For 2024 it shows two lines: energy security costs of N8,671,574 million and "Other receivables from Federation" of N8,840,472 million, which add to N17,512,046 million. For 2025 the energy security line is nil and the whole N11,201,028 million is "Other receivables from Federation". That line rose by N2,360,556 million, or 26.70 per cent. The total owed by the Federation fell by N6,311,018 million, or 36.04 per cent.

NNPC explains the "other" line in one sentence: it "relates to advance payment to Federation and the security costs incurred in protecting the oil and gas assets. This is under the framework of approval between the Government of Nigeria and the Group to incur security costs and charge same to the Federation." The note does not say how much of the N11,201,028 million is advance payments and how much is security costs. It does not name pipeline surveillance contracts, frontier exploration or any other item, and it does not show what was added or recovered during the year. Describing the whole N11.2tn as security costs goes further than the note does.

The figure is also a balance, not a year's spending. It is what NNPC says the Federation owed it at the close of 31 December 2025, built up over more than one year. The accounts do not give the security costs NNPC paid in 2025. Some coverage compared the N11.2tn with the N7.13tn of energy security expense recognised in 2024 and reported an increase of N4.07tn; that subtracts an annual expense from a year-end balance, two measures that are not comparable.

Note 24.2.1 follows the energy security receivable. It opened 2024 at N6,250,511 million, lost N40,947 million in exchange difference, gained N7,130,948 million of costs during 2024 and had N4,668,938 million defrayed, leaving N8,671,574 million. In 2025 nothing was added and the whole N8,671,574 million was defrayed. Note 24.2.2 gives NNPC's account: "During the year, no energy security expense was recognised (2024: N7.13 trillion). Following a reconciliation exercise with relevant government agencies, the Energy Security Cost receivables was netted off against royalties, taxes, and dividends due as at December 2024. The reconciliation exercise was concluded in September 2025." The accounting policy on page 49 ties these costs to Section 64 of the Petroleum Industry Act 2021, under which costs NNPC incurs as supplier of last resort for energy security reasons are for the account of the Federation, and describes them as the gap between the landing cost of petrol and the regulated price.

The royalty note is consistent with that settlement. Note 20 shows royalties, rentals and gas flare penalty payable of N9,205,667 million at the start of 2025. With N5,154,629 million added in the year and N1,177,408 million of excess provision written back, the balance reached N13,182,888 million. Payments of N11,561,558 million and a translation difference of N352,967 million left N1,268,363 million at year end. In 2024 royalty payments were N2,825,561 million. The note does not say how much of the 2025 payments was cash and how much was the netting described in Note 24.2.2; the cash flow statement on page 41 carries the same N11,561,558 million as "Royalties paid".

The company figures differ from the Group's. NNPC Ltd on its own shows other receivables from the Federation falling from N5,873,469 million to N5,260,901 million, a drop of N612,568 million. The rise in the Group figure therefore sits in NNPC's subsidiaries: the Group figure less the company figure is N5,940,127 million for 2025 and N2,967,003 million for 2024. The notes do not say which subsidiaries hold the balance.

The record supports NNPC on two points. The statements disclose the receivable, state its basis and record that the larger energy security balance was reconciled with government agencies rather than carried forward. And on NNPC's own figures the Federation owed it less at the end of 2025 than at the end of 2024.

Other figures in the report bear on the Federation's side of the account. Note 12 on page 87 records management fees of N468,636 million in 2025 (2024: N242,411 million), described as 30 per cent of profit oil and profit gas for managing production sharing contracts. Press reports of the September 2025 FAAC meeting put frontier exploration deductions, a separate 30 per cent set aside under the Petroleum Industry Act, at N318.05bn for January to August 2025. We have not obtained the FAAC working papers.

What the documents do not establish: whether any part of the N11,201,028 million has been deducted at FAAC, or will be. We did not obtain a FAAC communique or working paper that names a deduction for oil and gas asset security. The accounts do not show who approved the security framework, when, or on what terms, and they give no figure for petrol subsidy payments in 2025. NNPC's statement that the netting was agreed with "relevant government agencies" is its own account; we have not seen the reconciliation document.

We could not find a document recording an NNPC retail petrol promotion at N66 per litre, and this report does not rely on one.

What this rests on

NNPC Ltd 2025 Annual Financial Report (audited), downloaded from nnpcgroup.com/investors and read. Note 24 (p.105): 4,625,409 + 11,201,028 + 100 + 4,777,993 = 20,604,530; 20,604,530 - 2,335,585 = 18,268,945 (N million, Group 2025). Note 24.2 (p.106): 2024 Group 8,671,574 + 8,840,472 = 17,512,046; 2025 Group 0 + 11,201,028 = 11,201,028. Change in 'other': 11,201,028 - 8,840,472 = 2,360,556; 2,360,556 / 8,840,472 = 26.70%. Change in total: 17,512,046 - 11,201,028 = 6,311,018; 6,311,018 / 17,512,046 = 36.04%. Company: 8,671,574 + 5,873,469 = 14,545,043 (2024); 5,873,469 - 5,260,901 = 612,568. Group less company: 11,201,028 - 5,260,901 = 5,940,127 (2025); 8,840,472 - 5,873,469 = 2,967,003 (2024). Note 24.2.1: 6,250,511 - 40,947 = 6,209,564; + 7,130,948 = 13,340,512; - 4,668,938 = 8,671,574; 2025: 8,671,574 - 8,671,574 = 0. Note 20 (p.101): 9,205,667 + 5,154,629 - 1,177,408 = 13,182,888; 13,182,888 - 11,561,558 - 352,967 = 1,268,363. Press 'N4.07tn increase': 11,201,028 - 7,130,948 = 4,070,080 (balance minus annual expense). Note 12 (p.87): management fees 468,636 (2024: 242,411). Cash flow statement p.41: royalties paid 11,561,558. Accounting policy 2.6 (p.49): Section 64 PIA, under-recovery.

What this does not establish

The split of N11,201,028 million between advance payments to the Federation and security costs; what security costs were incurred in 2025; which subsidiaries hold the balance; who approved the security cost framework and on what terms; whether any part has been or will be deducted at FAAC; whether royalty 'payments' of N11,561,558 million were cash or netting; the reconciliation document itself; any N66 per litre retail promotion.