The World Bank has raised serious concerns over fiscal transparency and revenue management in Nigeria’s oil sector, revealing that the Nigerian National Petroleum Company Limited (NNPCL) failed to remit nearly half of its revenue gains to the Federation Account in 2024. According to the World Bank’s latest Nigeria Development Update, NNPCL remitted only N600 billion of the expected N1.1 trillion generated from crude sales and other income following the removal of the Premium Motor Spirit (PMS) subsidy. This leaves a significant shortfall of N500 billion unaccounted for.
The biannual report titled “Building Momentum for Inclusive Growth” highlights that the missing funds were reportedly used by NNPCL to offset its mounting debt arrears. This revelation comes in the wake of the Nigerian government’s landmark decision in 2023 to remove the controversial petrol subsidy, a reform that initially sparked public backlash due to soaring fuel prices but was intended to boost government revenue and fund critical infrastructure projects.
President Bola Tinubu’s administration received international praise for the bold move to fully deregulate the downstream petroleum sector in October 2024, coinciding with the launch of the Dangote Refinery. The subsidy removal was expected to save the government billions annually and increase fiscal space for social and economic programs.
However, the World Bank report indicates that NNPCL delayed transferring the revenue gains to the Federation Account, commencing remittances only three months after the subsidy removal, in January 2025. Since then, the company has remitted only 50% of these proceeds, retaining the rest to service legacy debts.
The report further notes that the Federal Government’s revenue mix for 2025 is projected to be 70% from oil and 30% from non-oil sources, contingent on full remittance of subsidy savings. Failure to receive the entire revenue share could undermine the government’s fiscal consolidation and development agenda.
A detailed breakdown revealed that NNPCL’s remittance to the Federation Account Allocation Committee (FAAC) dropped from N1.1 trillion in 2023 to just N600 billion in 2024. The report attributes this decline largely to the implicit subsidy that persisted until September 2024, despite full subsidy removal effective October 1, 2024.
While other revenue agencies recorded significant gains—driven by increased oil royalties, customs duties, and value-added tax revenues—NNPCL lagged behind in transferring funds. As of February 2025, the World Bank notes that NNPCL claims to be owed N7.8 trillion in arrears, while the Federation asserts it is owed N6.1 trillion, leaving a net arrears balance of N1.7 trillion.
Despite the sharp increase in gross revenues from N16.5 trillion (7% of GDP) in 2023 to N29.5 trillion (10.6% of GDP) in 2024 across Nigeria’s main revenue agencies, the failure of NNPCL to remit full revenues poses risks to national fiscal health.
To address these challenges, the World Bank urged the Nigerian government to conduct a forensic audit of NNPCL’s finances and implement standardized, transparent reporting templates for revenue remittances to FAAC. Strengthening public financial management systems is critical to ensure that all fiscal gains from subsidy reforms translate into actual funds for the Federation Account.
The Bank emphasized, “Resolving any remaining net arrears and channeling the full benefits of subsidy reform to the Federation is critical for sound fiscal management and sustained economic growth.”
Without these reforms, the World Bank warns that Nigeria’s fiscal consolidation efforts could be undermined, limiting the government’s ability to invest in essential infrastructure, social services, and economic diversification.
The report’s cautious optimism reflects the potential benefits of subsidy removal for Nigeria’s economy, provided full fiscal gains are realized and transparently managed. The reforms have already stimulated increases in non-oil revenues and enhanced fiscal space, but challenges in remitting petroleum revenues must be resolved to maintain investor confidence and economic stability.
Nigeria’s energy sector remains a pivotal source of government revenue, and improving governance within NNPCL will be key to unlocking the full potential of recent economic reforms. With continued efforts to enhance transparency, accountability, and fiscal discipline, the country can strengthen its economic foundations and deliver on promises for inclusive growth.