NNPC Confronted with N2.27tn In Lawsuits as Legal Exposure Intensifies

The Nigerian National Petroleum Company Limited (NNPC) is confronting significant legal exposure, with pending lawsuits against the state-owned energy firm estimated at around N2.27tn for the financial year ending 2024, according to an analysis of its 2024 Annual Report.

The report revealed that while NNPC recognised N474.8bn as contingent liabilities in its financial statements, additional unresolved lawsuits valued at about N1.8tn remain across various courts, with no provisions made for them.

This total represents a sharp increase of N1.63tn, or roughly 256 per cent, from the N638.38bn recorded in 2023. Contingent liabilities alone surged from N18.14bn in 2023 to N474.8bn in 2024—a rise of over 2,500 per cent. Similarly, unresolved lawsuits without provisions increased from N620.24bn in 2023 to N1.8tn in 2024, a jump of about 190 per cent.

NNPC explained that the recognised contingent liabilities relate to cases where the likelihood of loss is deemed probable, based on advice from the company’s external legal counsel. “A provision has been made in the Financial Statements for contingent liabilities for lawsuits against the Group estimated at N474.8bn,” the report stated.

For the additional N1.8tn in claims, legal advisers consider an adverse outcome only possible, not probable, which is why no provision was made in the financial statements in line with accounting standards governing contingent liabilities. “No provision has been made in the financial statements for contingent liabilities in respect of these lawsuits,” the report added.

The growing legal exposure stems from NNPC’s long history of disputes inherited from its former status as the Nigerian National Petroleum Corporation, prior to its conversion into a limited liability company under the Petroleum Industry Act. Litigation includes joint venture cash-call disputes, crude oil supply contracts, pipeline construction and maintenance claims, debt recovery suits, arbitration awards, and disagreements with marketers and service providers. Some cases date back more than a decade and involve both domestic and international claimants.

While contingent liabilities do not immediately require cash outlay, the scale of unresolved lawsuits poses potential risks to NNPC’s balance sheet, cash flow, and investment plans, particularly as the company navigates crude-backed loans, production challenges, and funding pressures. The disclosures highlight the legal and financial legacy challenges facing NNPC as it aims to operate commercially, enhance transparency, and restore investor confidence in Nigeria’s oil and gas sector.