The Nigerian National Petroleum Company Limited (NNPC Ltd) spent about ₦27.76 trillion on cost of sales, distribution and general administrative expenses in 2025, accounting for roughly 80 per cent of the company’s ₦34.52 trillion revenue for the year.

The figure, contained in the company’s audited 2025 financial statements, has drawn attention to the cost of running Nigeria’s state-owned energy company, particularly as NNPC seeks to improve efficiency and compete commercially with major international oil companies.

However, the ₦27.76 trillion figure does not represent money spent on administration alone. The largest portion was the cost of producing, purchasing and handling oil and gas, while a much smaller amount went to selling and distribution and general corporate administration.

Where did the money go?

NNPC’s cost of sales accounted for about ₦25.14 trillion, making it by far the largest component of the company’s reported expenses.

Among the major items were approximately ₦4.66 trillion in royalties, ₦4.15 trillion in direct well expenses, ₦3.71 trillion in depreciation of oil and gas properties and ₦2.79 trillion for crude oil purchases.

The company also spent about ₦1.86 trillion on natural gas purchases, ₦1.79 trillion on petroleum products, ₦1.69 trillion on flow-station expenses and ₦1.06 trillion on crude handling and port charges.

Other production-related costs included levies payable to the Niger Delta Development Commission, gas-flaring charges and penalties, labour, insurance and security, as well as safety, environmental and pollution-control expenses.

The company also incurred costs associated with maintaining wells, pipelines, processing infrastructure and production facilities.

Adminitrative costs were much smaller

NNPC’s general and administrative expenses stood at about ₦2.59 trillion in 2025, down from roughly ₦3.58 trillion the previous year.

Employee benefits accounted for approximately ₦813.9 billion, while depreciation on other property, plant and equipment was about ₦665.8 billion.

Other administrative expenses included security, transportation and travel, training and recruitment, professional and consultancy services, and software licences and maintenance.

Training and recruitment alone amounted to ₦111.04 billion, representing a 22.8 per cent increase from the ₦90.39 billion recorded in 2024.

Selling and distribution expenses were comparatively small, at roughly ₦33.1 billion, slargely relating to the transportation of petroleum products to depots.

Revenue fell, but profit increased

The scale of the expenditure becomes more significant when compared with NNPC’s overall financial performance.

The company reported ₦34.52 trillion in revenue in 2025, down about 24 per cent from ₦45.1 trillion in 2024. NNPC attributed the decline principally to lower crude oil prices and reduced volumes of petroleum products following the deregulation of the downstream market.

Despite the fall in revenue, profit after tax increased to approximately ₦7.2 trillion, compared with ₦5.4 trillion in 2024.

NNPC attributed the improved profitability to stronger operational performance, cost discipline and efforts to recover outstanding debts.

The company’s general and administrative expenses declined by about 25 per cent, while other income increased significantly. Operating cash flow also rose to ₦12.8 trillion.

NNPC also declared a ₦5.8 trillion dividend for 2025, a 35 per cent increase from the previous year.

What is driving the cost structure?

NNPC operates across a broad section of Nigeria’s petroleum industry, including exploration and production, gas, refining and petroleum-product distribution.

Its 2025 results showed crude oil and condensate production averaging 1.77 million barrels per day, described by the company as its highest level in five years. Natural gas supply averaged 7.2 billion standard cubic feet per day, a three-year high.

The company therefore argues that a substantial part of its expenditure reflects the cost of operating and maintaining a large oil and gas business rather than simply corporate overhead.

The distinction is important because comparing NNPC’s entire ₦27.76 trillion cost base with the administrative spending of another company would give a misleading picture.

How does NNPC compare internationally?

The size of NNPC’s expenditure has prompted comparisons with other national oil companies, including Brazil’s Petrobras and Saudi Arabia’s Aramco.

However, such comparisons require caution because the companies have different production volumes, asset structures, downstream operations, accounting practices and business models.

What the NNPC figures do show is that the company operates with a very large cost base relative to its revenue. At the same time, its latest accounts show that some costs declined while profitability increased.

The challenge for NNPC will be to sustain production and investment while continuing to control costs and improve the efficiency of its operations.

For Nigeria, the issue is particularly significant because NNPC remains a major participant in the country’s oil and gas industry and an important source of government revenue.

The company’s latest accounts therefore provide two contrasting pictures: a business that generated ₦7.2 trillion in profit and ₦22.3 trillion in taxes, royalties and other remittances, but one that also required more than ₦27 trillion in reported costs to generate its revenue.

The question surrounding the figure is consequently less about whether the entire ₦27.76 trillion represents waste and more about how efficiently each component of that expenditure contributes to production, energy security, profitability and returns to Nigerians.