The Nigerian National Petroleum Company Limited is facing potential legal exposure running into trillions of naira, with pending lawsuits against the state-owned energy firm rising to about N2.27tn in the financial year ended 2024, according to an analysis of its 2024 Annual Report by The PUNCH.

The report showed that while the national oil company has recognised N474.8bn as contingent liabilities in its financial statements, additional lawsuits estimated at N1.8tn remain unresolved across various courts, with no provisions made for them.

The legal claims figure represents a N1.63tn increase, or about 256 per cent, compared with the N638.38bn recorded in 2023. The analysis showed that NNPC recognised N474.8bn as contingent liabilities in its 2024 financial statements, a steep rise from the N18.14bn provided for in 2023, an increase of N456.66bn, or over 2,500 per cent year-on-year.

In addition, the company disclosed unresolved lawsuits estimated at N1.8tn in 2024 for which no provisions were made, compared with N620.24bn in similar cases reported in 2023. This reflects an increase of about N1.18tn, or roughly 190 per cent, in claims considered 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 the company’s external legal advisers.

“A provision has been made in the Financial Statements for contingent liabilities for lawsuits against the Group estimated at N474.8bn,” the report stated, noting that the figures were derived from legal confirmations provided by external counsel.

However, the company disclosed that it has also been advised by its legal counsel that for another category of lawsuits, valued at N1.8tn, the likelihood of an adverse outcome is considered only 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 provision was made in the financial statements for these cases, in line with applicable accounting standards governing contingent liabilities.

“Accordingly, no provision has been made in the financial statements for contingent liabilities in respect of these lawsuits,” It added.

NNPC’s growing legal exposure reflects a long history of disputes inherited from its former status as the Nigerian National Petroleum Corporation, before its transformation into a limited liability company under the Petroleum Industry Act.

Over the years, the national oil company has been entangled in litigation arising from 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 of the cases date back more than a decade, involving both domestic and international claimants, while others stem from commercial disagreements following the restructuring of the oil and gas sector under the PIA.

While contingent liabilities do not automatically translate into immediate cash obligations, the sheer scale of unresolved legal claims poses potential risks to the company’s balance sheet, future cash flows, and investment plans, especially at a time when NNPC is also grappling with crude-backed loans, production challenges, and funding pressures.

The disclosures underscore the legal and financial legacy issues confronting the national oil company as it seeks to operate on a fully commercial footing, improve transparency, and restore investor confidence in Nigeria’s oil and gas sector.