ABUJA, Nigeria (VOICE OF NAIJA)- The Nigerian National Petroleum Company Limited is facing significant potential legal exposure amounting to trillions of naira, with pending lawsuits against the state-owned energy firm estimated at about N2.27tn in the financial year ended 2024, based on a review of its 2024 Annual Report.
The report indicates that while the national oil company recognised N474.8bn as contingent liabilities in its financial statements, additional unresolved legal cases valued at about N1.8tn are still pending in various courts, with no provisions made for them.
The total value of legal claims represents an increase of N1.63tn, or roughly 256 per cent, compared with the N638.38bn recorded in 2023.
It further showed that NNPC recognised N474.8bn as contingent liabilities in its 2024 accounts, a sharp rise from the N18.14bn recorded in 2023, reflecting an increase of N456.66bn, or more than 2,500 per cent year-on-year.
In addition, the company reported unresolved lawsuits estimated at N1.8tn in 2024 for which no provisions were made, compared with N620.24bn in similar cases in 2023.
This marks an increase of about N1.18tn, or approximately 190 per cent, in claims assessed as possible but not probable.
According to the company’s financial disclosures, the recognised contingent liabilities relate to lawsuits where the likelihood of loss has been assessed as probable, based on confirmations received from its external legal advisers.
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“A provision has been made in the Financial Statements for contingent liabilities for lawsuits against the Group estimated at N474.8bn,” the report stated, adding that the figures were derived from legal confirmations provided by external counsel.
However, the company also disclosed that its legal advisers had indicated that another category of lawsuits, valued at N1.8tn, carries a likelihood of loss that is considered possible, but not probable.
“The Group has also been advised by its legal counsel that it is only possible, but not probable, that action will succeed for some lawsuits against the Group which are pending in various courts estimated at N1.8tn,” the report added.
On this basis, NNPC explained that no provisions were made in the financial statements for these cases, in line with applicable accounting standards on contingent liabilities.
“Accordingly, no provision has been made in the financial statements for contingent liabilities in respect of these lawsuits,” it added.
The company’s rising legal exposure reflects a long-standing 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.
Over the years, the national oil company has faced litigation arising from joint venture cash-call disputes, crude oil supply contracts, pipeline construction and maintenance claims, debt recovery actions, arbitration awards, and disagreements with marketers and service providers.
Some of these cases date back more than a decade and involve both local and international claimants, while others stem from commercial disputes following the restructuring of the oil and gas sector under the PIA.
Although contingent liabilities do not automatically translate into immediate cash obligations, the magnitude of the unresolved legal claims presents potential risks to the company’s balance sheet, future cash flows and investment plans, particularly at a time when NNPC is contending with crude-backed loans, production challenges and funding pressures.
The disclosures highlight the legal and financial legacy challenges confronting the national oil company as it strives to operate on a fully commercial basis, strengthen transparency, and rebuild investor confidence in Nigeria’s oil and gas industry.