NNPC, accounting for fuel subsidy, By Uddin Ifeanyi

I am not an accountant, so my opinion on the NNPC’s recently released 2025 annual financial report is a qualified one. It matters, therefore, that PwC, the audit and assurance firm, which signed off on the report has no doubt that it represents a true and fair view of the corporation’s performance under the country’s reporting standards. Far more comforting was my former colleague’s response to the report’s release: “Wonderful! While I was working in the bank, as the Corporate Banking Group’s relationship manager for the NNPC, the ‘most recent’ financials we had was about 15 years old”. That was some 15 years ago. In terms of accountability and public disclosure, then, Nigeria’s most important corporation over the last 49 years is making steady progress.

That said, significant parts of the picture of a profitable company undergirded by improving production, which the report tries so convincingly to take, are out of focus. It is a fair argument that the report’s headline profit growth figure appears to overstate the improvement in the corporation’s underlying trading performance. Why this blur? The NNPC Group’s net profit rose by about 33 per cent to ₦7.2 trillion last year, despite a 23 per cent drop in revenue from ₦45.1 trillion in 2024, to ₦34.5 trillion last year. Gross profit was down by equivalent percentage points to ₦9.4 trillion in the same period. While two different lines, a ₦5 trillion rise in other income, and a ₦1 trillion fall in general and administrative expenses, explain this seeming contradiction, the resulting problem is not that the increase in the corporation’s profit last year did not come from increased sales or gross profits. It is instead included in the answer to the question, “How repeatable will the ‘other income’ performance be in future accounting periods?”

The corporation’s balance sheet is a smorgasbord of paints off a similarly nuanced canvas. With a current ratio of about 0.85, the NNPC’s short-term assets (₦28.1 trillion) do not quite make up for its short-term liabilities (₦33.2 trillion). With the right timing, depending on the nature of its account payables, and the makeup of its receivables, the corporation ought to be able to easily meet its obligations. This balance sheet structure has one other purpose: it helps make sense of the corporation’s cash pressure. The group’s cash balance was down from ₦10.3 trillion in 2024 to ₦6.4 trillion by financial year end 2025. This, despite an increase in cash generated from operations to ₦12.9 trillion in 2025 from ₦11.0 trillion the previous year. Trade and other receivables fell from the ₦31.4 trillion at which it printed in 2024, but even at ₦19.7 trillion, last year, it remained substantial.

On the upside, there is plentiful evidence of a production recovery. Still the chorus of “Hallelujahs” are pressed in on two sides by the narrative section of the report’s claim of average crude and condensate production of 1.77 million barrels per day – a five-year high, and the financial highlights’ listing of 565.8 million barrels of crude oil production. On the face of it, annualised, the latter number translates into about 1.55 million barrels per day of production. My guess is that these two figures address different scopes — i.e. national production as against the NNPC’s own or equity production. Any which way, the report could have helped make this reconciliation easier. Equal levels of clarity could have been facilitated by tying natural gas production directly to segment revenue, investment returns, and cash generation.

Overall, the NNPC report indicates considerable operating progress. Operating cash generation is especially impressive. Nonetheless, the dip in revenue and gross profit, the facts that profit growth is almost entirely the result of large other income performance, and that current liabilities swamp current assets make the headline profit an incomplete gauge of the organisation’s financial strength.

For more than a decade now, the dominant presence in the room when the NNPC’s accounts are discussed is the extent of outgoings on the subsidy for the pump-gate price of petrol. And this is the main reason I paid this much attention to the corporation’s annual report for last year – to see how far the corporation’s numbers corroborate the federal government’s insistence that it has removed the subsidy completely. How do the numbers stack up? The corporation’s financial statements continue to use categories such as “energy security” and “under-recovery.” These are not exactly identical terms. Energy security expenses may include more than petrol price support.

Interestingly, the NNPC’s financial statement for 2024 reports ₦8.67 trillion as an “under-recovery” balance. Other coverage in the 2025 statement describes ₦8.67 trillion as a “federation receivable.” Both labels and reporting periods are not interchangeable, but if either means that the corporation continues to cover a gap between petrol’s supply cost and a managed selling price and records the amount as recoverable from the federation, the economic burden from the fuel subsidy has not disappeared. It has simply been absorbed by the NNPC or the federation rather than fully passed on to consumers.

Uddin Ifeanyi, a journalist manqué and retired civil servant, can be reached @IfeanyiUddin.