State governments have called for a forensic audit of Nigeria’s crude oil-backed loan arrangements, warning that limited transparency in crude-for-loan and swap agreements could be affecting inflows into the Federation Account.
The call was made by state finance commissioners at the end of the 2026 retreat of the Federation Account Allocation Committee (FAAC) Post-Mortem Sub-Committee held in Enugu between February 9 and 11. In a communiqué issued after the meeting, participants urged that all crude-backed borrowing arrangements should undergo legislative approval, full disclosure and independent auditing.
According to the communiqué, existing agreements should also be reviewed through forensic audits in order to rebuild confidence and safeguard revenues belonging to the three tiers of government.
The demand follows recent findings showing that the Nigerian National Petroleum Company Limited (NNPC Ltd.) committed about 272,500 barrels of crude oil per day to several crude-for-loan arrangements valued at about $8.86bn.
Available financial records indicate that roughly $2.61bn of the loans has been repaid, representing about 29 per cent of the facility, while about $6.25bn remains outstanding. Data also shows that only around $6.97bn has been drawn from seven crude-backed loan deals as of December 2023.
Participants at the retreat said the Federation Account – the pool through which revenues are shared by the Federal Government, states and local governments continues to face significant pressure due to persistent revenue leakages and weak oversight.
They warned that opaque deductions, institutional inefficiencies and certain fiscal practices are reducing the amount of revenue available for distribution among the three levels of government.
Another concern raised during the meeting was the growing number of quasi-fiscal deductions made before revenues are transferred into the Federation Account. These include costs related to power sector subsidies, debt write-offs and operational expenses.
According to the participants, such deductions undermine transparency and weaken budgetary discipline.
The retreat also reviewed developments in the petroleum sector following the implementation of the Petroleum Industry Act. While the law is expected to improve governance in the industry, some operational practices were said to be raising concerns among stakeholders.
Issues highlighted include the transfer of joint venture assets to NNPC Limited, the handling of production sharing contract profits and the use of the Frontier Exploration Fund. Participants said these developments could have reduced the amount of oil revenue flowing into the Federation Account.
To strengthen oversight, the meeting stressed the need for greater access to Federation Account data by oversight bodies, particularly the Office of the Auditor-General for the Federation. This, participants said, would make it easier to track revenue inflows and recover lost funds.
They also called for stronger auditing capacity and quicker publication of audit reports to ensure that financial irregularities are addressed promptly.
In addition, the retreat raised concerns about the high cost of revenue collection by some government agencies, describing it as another factor draining resources meant for distribution to the three tiers of government.
Participants recommended periodic reviews of these charges to ensure they align with international best practices.
Another major issue discussed was Nigeria’s increasing reliance on crude-backed loans and oil-for-product swap arrangements, including schemes such as Project Gazelle and the Direct Sale Direct Purchase programme.
Officials warned that such agreements could obscure revenue flows and reduce accountability in the management of oil earnings. They therefore advised that future crude-backed financing arrangements should only proceed after legislative approval and full disclosure.
The meeting also recommended closer collaboration between the Revenue Mobilisation Allocation and Fiscal Commission and NNPC Limited to ensure accurate accounting of oil revenues and proper documentation of joint venture asset transfers.
Recent estimates suggest that a significant portion of Nigeria’s crude oil production is tied to servicing such debt arrangements. Analysis indicates that about 213,000 barrels of crude oil per day have been committed to four major facilities – Project Gazelle, Project Yield, Project Leopard and Eagle Export Funding.
If maintained throughout 2025, this would amount to roughly 77.75 million barrels of crude used for debt servicing during the year.
Data from the Nigerian Upstream Petroleum Regulatory Commission shows that Nigeria produced about 530.41 million barrels of crude oil in 2025, meaning around 14.66 per cent of the country’s output was allocated to repay crude-backed loans.
Based on an average price of $72.08 per barrel for Bonny Light crude in 2025, the volume used for loan servicing would be worth approximately $5.6bn.
Economic analysts have linked declining oil earnings partly to such forward-sale and crude-backed financing arrangements.
The Chief Executive Officer of AHA Strategies, Ademola Adigun, said the country’s crude revenue is being constrained by agreements whose details are not fully disclosed.
He noted that several projects financed through crude-backed deals were executed with limited public scrutiny, making it difficult for citizens and policymakers to track the full financial implications.
Similarly, development economist Aliyu Ilias said Nigeria’s crude trading system has become increasingly complicated due to multiple swap agreements and oil-to-naira transactions that may not be fully reflected in official records.
The Director of the Centre for the Promotion of Private Enterprise, Muda Yusuf, also recalled that many forward crude sales were arranged during previous fiscal crises to raise emergency funds.
According to him, those agreements are still affecting Nigeria’s current oil revenues because the crude committed under those deals continues to be delivered to repay the loans
.
However, Yusuf noted that operational transparency within NNPC Limited has improved in recent years. He said full disclosure of crude trading and swap arrangements would help strengthen public confidence in the management of the country’s oil revenue.
