The oil we produce and the money we didn’t see

There is a fiscal contradiction that defines Nigeria in 2026, and it must be spoken plainly at the presidential table. We produce more oil than we share, we earn more than we declare, and we borrow more when oil prices are high. That is not a market failure. It is a failure of accounting, and it begins and ends in the oil sector.

For three years we have celebrated reform. Subsidy is gone. The naira floats. The Federation Account has more than doubled. States that shared N2.8tn in 2022 shared N7.3 trillion in 2025. Yet the federation still extends its capital budget, still struggles to fund roads and clinics, and still structures complex borrowings at the peak of the oil market. The reason is simple and painful. The chain between the wellhead and the Federation Account is leaking, and the cost of keeping that chain running is consuming the profit before the federation sees it.

The audited numbers now allow us to say this without conjecture. In its 2025 accounts, NNPC Limited reported revenue of N34.52tn and operating costs of N27.76tn, being cost of sales, selling and distribution, and administration. That is 80.4 per cent of revenue spent before a single naira of profit is declared. For every dollar spent on operations, NNPC generated about $1.24 in revenue, against about $5.46 for Brazil’s Petrobras, which generated almost four times NNPC’s revenue with lower costs. Saudi Aramco operated at 57.7 per cent cost to revenue, Equinor at 76.2 per cent. Context matters, portfolios differ, but the message is unavoidable. Our national oil company is phenomenally expensive to run. To spend 70 kobo, and indeed 80 kobo, to make one naira in oil is not efficient. In the field, it looks like sabotage. Royalties of N4.66tn, direct well expenses of N4.15tn, depreciation of oil and gas properties of N3.71tn, crude purchases of N2.79tn, security of N129bn, and still national production hovers at a five-year high of only 1.77 million barrels per day, far below installed capacity.

When cost-to-income is this high, the first reform is not to drill more wells. It is to standardise cost to global benchmarks. A presidential directive must require NNPC to publish a unit operating cost per barrel, benchmarked transparently against Petrobras, Aramco, Equinor and Sonangol, with a statutory glide path to below 50 per cent within three years. Every kobo above that benchmark is money that should have gone to FAAC and did not.

The second leakage is more serious because it never reaches FAAC at all. There are five revenue lines well known to industry but invisible to the federation.

The first is the crude allocated for pipeline security. For two years, a warning was given in Abuja that militants and contractors were being paid not in naira but in crude, outside the OPEC primary regulated quota, from what traders call excess for secondary markets. It sounded heretical. Today the books have confirmed it. NNPC’s disclosures show that N11.2tn is being claimed from the Federation for costs and advances incurred on its behalf, including securing assets, up 57 per cent from N7.13tn in 2024 and from N4.8tn in 2023. Analysts who tracked those disclosures linked them to 78,000 barrels per day last year, now 110,000 barrels per day given to two companies off the books for pipeline surveillance. That is a 41 per cent increase in oil given away while production barely moved. At seventy-five dollars, 110,000 barrels per day is over three billion dollars a year, or about N4.5tn, that never enters the Federation Account. This is not pipeline security. It is a second quota, created outside appropriation, outside the budget, and outside OPEC declaration. The intelligence from the field that forty per cent of that value comes back to Abuja as settlement, not as federation revenue, explains why pipelines are said to be secured while the treasury remains insecure.

The second is condensates. OPEC quota regulates crude oil, not condensates. Condensates are ten to twelve per cent of gross volume, light hydrocarbons that sell at crude prices. They legally exist outside the quota but economically belong to Nigeria. Yet they are routinely not reported to FAAC as oil revenue. That is up to 150,000 barrels per day that we produce, sell, but do not share.

The third and fourth are in gas. Up to 1.5 million metric tonnes per annum of equity LNG is deducted from NLNG before accounting to the federation, worth over seven hundred million dollars at current prices. Dividends from the West Africa Gas Pipeline Company, WAGPCo, are collected by NNPC but are not separately line-itemed in the FAAC communique. Both are federation assets that have become company retentions.

The fifth is trading margin. NNPC lifts a minimum of 200 million barrels annually on behalf of the federation. At an industry-standard commission of two dollars per barrel, that is four hundred million dollars retained and netted off before remittance. It is not reported gross.

• FG saved N3.56tn in nine months – Report
• Seven modular refineries to begin operations in 2027
• FG pumps N5tn into military operations

Add excess production sold in secondary markets through reclassification above primary quota, and you understand why Nigerians feel broke at eighty dollar oil. We share less than we produce because we account for less than we lift.

The third leakage is how we finance the gap we create. At a time when oil prices are significantly above the budget benchmark of seventy-five dollars, the Federal Government drew $1.5bn in June from a $5bn total-return swap with First Abu Dhabi Bank, a facility where Nigeria posts naira-denominated securities worth about 133 per cent of the amount financed. Fitch has warned that the structure makes debt less transparent and complicates restructuring. Separately, the National Economic Council approved Project Gazelle II, a $4.5bn refinancing that rolls over about $1.5bn outstanding from the original $3.3bn Gazelle and unlocks three billion dollars fresh. The terms are better, pledged crude falls from 90,000 to 78,750 barrels per day, but NNPC’s own statements show that Gazelle, Leopard and Leopard II together already encumber more than 186,000 barrels per day of future crude for debt repayment. We are mortgaging tomorrow’s oil to fund today’s deficit while today’s oil is not fully accounted for.

This is why the question that must be asked is not whether we need pipeline security. We do. The questions are: what are pipeline security expenses, why is it not appropriated in the budget, and where does the N11.2tn come from exactly? Under Section 64(m) of the Petroleum Industry Act, NNPC fronts the cost to private contractors and recovers it by withholding royalties, taxes and dividends due to the federation. It spends first, then nets off against FAAC, without passing through the National Assembly. That is spending without appropriation. When Senator Agom Jarigbe raised it at the ad hoc committee on economic sabotage early this year, he was shut down abruptly. The same joint committees later dismissed petitions for decentralisation of surveillance, saying there was no credible evidence and that continuity is essential. Continuity of an off-budget system that consumes 34 per cent of NNPC’s revenue while still losing oil around smaller pipelines, as admitted by NNPC’s own leadership.

This is why the final document that matters is not the published financial statement. It is the management letter. Every audit produces two documents. The first is the beautiful one given to the press: profit of N7.2tn, revenue of N34.5tn, remittances of N22.3tn. The second is the true one given to the board, the audit committee and the chairman, where auditors list in brutal private language control failures, unreconciled crude, unaccounted condensates, receivables without invoices, security expenses without appropriation, related party transactions and override of controls. That letter is the conscience of the audit, and for NNPC, it has never been published. Inside it will be the auditors’ comment on the N11.2tn, on the 110,000 barrels, on why cost is 80.4 per cent, on the five hidden lines, and on the total-return swap and Gazelle.

The remedy therefore is not to reverse the reforms. Reversal would restore subsidy corruption. The remedy is to transcend the reforms from progress to development, from approvals to productive and measurable outputs, and from fiscal arithmetic to national unity.

Power that does not block leakages is not reform. It is management of decline.

What must be done is presidential and non-negotiable. Ban any crude allocation outside appropriation and make off-book lifting a criminal offence. Monetise all pipeline security payments, appropriate them in naira in the federal budget, and pay only after independent verification of barrels protected. Publish a single daily production dashboard: gross volume, OPEC quota oil, condensates, secondary excess, security allocation, and debt-pledged barrels reconciled to FAAC monthly, with vessel names and buyers. Force the five hidden lines into the light as separate lines in the FAAC communique. Impose a statutory ceiling of 50 per cent cost-to-income within 36 months with independent audit. Ban new crude-backed facilities when oil trades above benchmark for two quarters and publish the full register of forward sales since 2019. And direct the Auditor-General to obtain and publish the NNPC management letters for 2022 to 2025 within fourteen days, with board responses laid before the National Assembly.

Until we do that, every reform will be progress without development, revenue without relief, and production without prosperity. The federation will continue to share what is left after leakages, not what was lifted from the ground.