The Nigerian National Petroleum Company Limited (NNPC Ltd.) has committed a significant portion of its future crude production to financing and prepayment arrangements, raising concerns about the amount of cash the company may have available from future oil sales.
NNPC’s 2025 audited financial statements show that obligations linked to forward crude-sale and prepayment arrangements stood at about N8.25 trillion at the end of the year. The commitments require the company to deliver crude to counterparties over several years as repayment for funds received upfront.
The three major arrangements cover about 186,250 barrels of crude per day, meaning part of NNPC’s future production has already been committed to servicing these obligations.
Three major crude-financing deals
The largest facility is Project Gazelle, which dates back to December 2023. Under the arrangement, NNPC committed 90,000 barrels per day from production-sharing contract assets for five years.
NNPC drew about N4.9 trillion from the initial N5.1 trillion facility and repaid N1.2 trillion in principal during 2025. About N2.81 trillion remained outstanding at the end of the year.
Project Leopard, signed in December 2024, requires NNPC to supply 35,000 barrels per day for five years. The company had drawn N3.05 trillion under the arrangement and repaid N420 billion in principal and N305 billion in interest during 2025.
A second facility, Project Leopard II, was signed in December 2025. It requires NNPC to supply 61,250 barrels per day for five years. The company had drawn N3.036 trillion by the end of 2025, with repayment scheduled to begin in June 2026.
Why the commitments matter
Forward-sale arrangements effectively provide financing upfront, with repayment made through future crude deliveries rather than cash.
While the structure can provide immediate liquidity, it also reduces the amount of crude available for future open-market sales. This could affect NNPC’s future cash generation and the funds available for remittances and investment.
The arrangements also expose the company to changes in crude prices, production levels and borrowing costs.
If oil prices rise significantly, NNPC could potentially lose the opportunity to sell some of its committed barrels at higher market prices. Conversely, lower prices could reduce the economic value of the crude being delivered while the company remains bound by its repayment obligations.
Interest rates also present an additional risk because some of the facilities are priced against the Secured Overnight Financing Rate (SOFR).
Production growth becomes more important
The growing commitments make higher oil production increasingly important for NNPC.
The company reported average crude oil and condensate production of about 1.77 million barrels per day in 2025, its highest average daily production in five years. NNPC is targeting production of 2 million barrels per day by 2027 and 3 million barrels per day by 2030.
Higher output could provide more barrels for NNPC to sell after meeting its existing delivery obligations, helping to strengthen future cash flows.
However, production disruptions, oil theft, pipeline problems or weaker crude prices could limit the benefits of increased output.
More financing commitments remain
NNPC’s financial statements also disclose additional funding arrangements that could require future crude deliveries.
Under an agreement relating to OML 42, about N1.514 trillion is available to NNPC Exploration and Production for an upfront purchase arrangement, although only N44.98 billion had been received by the end of 2025.
A separate agreement covering OML 65 makes about N957.65 billion available, while an arrangement involving OPL 809/810 provides for commitments of up to N430 billion.
These undrawn amounts are separate from the N8.25 trillion already recognised in forward-sale obligations, but they indicate that future production could face additional claims as more funds are drawn.
Cash flow remains the key issue
NNPC recorded a profit after tax of N7.18 trillion in 2025, up from N5.41 trillion a year earlier. Operating cash flow also increased to N12.81 trillion. However, the company’s cash balance fell to about N6.35 trillion from N10.31 trillion.
Crude oil remained NNPC’s biggest source of revenue, generating about N25.39 trillion, or 74 percent of the company’s N34.52 trillion revenue in 2025.
This means the company’s ability to increase production and generate cash from barrels not already committed to financing arrangements will be critical to its financial position.
The central challenge for NNPC is therefore not only increasing oil production, but ensuring that higher output translates into sufficient free cash after existing crude-delivery commitments and financing costs are met.
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