By Andy Odeh

NNPC Limited welcomes scrutiny of its financial performance. However, the suggestion in The Guardian of October 2, 2026 that the Group’s N27.76 trillion cost figure demonstrates operational inefficiency is not supported by that figure alone. The 2025 Audited Financial Statements show lower reported costs, improved gross profit margin and stronger profit and operating cash flow.

We are exercising our right of reply to explain the composition of these costs and ensure that the public can assess our performance with the relevant context. The expenditure figures are disclosed in our accounts; the issue is the conclusion drawn from them.

What the N27.76 trillion represents
The total combines three separate categories: N25.14 trillion in cost of sales, N33.10 billion in selling and distribution expenses, and N2.59 trillion in general and administrative expenses. Approximately 91% of the total is therefore cost of sales. It would be misleading to interpret the full amount as administrative overhead or discretionary spending.

For an integrated energy company, cost of sales includes the cost of producing oil and gas and purchasing commodities for sale. Note 8 of the accounts discloses, among other items, N4.66 trillion in royalties, N4.15 trillion in direct well expenses, N2.79 trillion in crude oil purchases, N1.86 trillion in gas purchases and N1.79 trillion in petroleum products. These categories must be understood in relation to the activities and revenues they support.

Cost of sales also includes N3.71 trillion in depreciation of oil and gas properties. Depreciation recognises the use of assets over their useful lives; it is not a cash payment of that amount during 2025. It remains a real accounting expense, but treating it as cash spent during the year would give readers the wrong impression.

Royalties and the NDDC levy are statutory obligations. Production and procurement costs remain subject to commercial discipline, while charges such as those associated with gas flaring should be scrutinised in their own right. Recognising these distinctions does not excuse unnecessary expenditure; it enables a meaningful assessment of it.

The accounts show lower costs and improved margins
The comparative figures provide important evidence. Cost of sales declined from N33.36 trillion in 2024 to N25.14 trillion in 2025, a reduction of approximately 24.6%. General and administrative expenses fell from N3.58 trillion to N2.59 trillion, a reduction of approximately 27.6%. Selling and distribution expenses declined from N145.70 billion to N33.10 billion.

Revenue declined by approximately 23.4% to N34.52 trillion. As explained in our results announcement, this principally reflected lower crude oil prices and reduced white petroleum product volumes following market deregulation. Changes in prices and sales volumes also affect costs, so a fall in expenditure should not automatically be attributed entirely to efficiency gains.

Nevertheless, the relationship between revenue and costs improved. Gross profit margin rose from approximately 26.0% to 27.2%, although gross profit in naira terms declined. General and administrative expenses also fell as a share of revenue, from approximately 7.9% to 7.5%. These measures provide a more useful assessment than the size of the cost total in isolation.

Stronger earnings and cash generation
Profit after tax increased by approximately 33% to N7.18 trillion, compared with N5.41 trillion in 2024. Net cash generated from operating activities rose from N11.00 trillion to N12.81 trillion, an increase of approximately 16.5%. The Company also announced a N5.8 trillion dividend, 35% higher than the previous year.

Profit reflects the full income statement, including other income, gains and losses, financing and taxation. We therefore do not present profit growth alone as proof that every operation is efficient. Read alongside the improved gross margin and stronger operating cash flow, however, the results demonstrate a profitable business with greater cash generation despite lower revenue.

The financial results were accompanied by production growth. As disclosed in our results announcement, NNPC Limited’s equity share of oil and condensate production increased by 11%, while total natural gas production rose by 9%. This operating progress supports the Company’s ambition to build a more competitive energy business.

International comparisons require a consistent basis
NNPC Limited supports benchmarking against international energy companies. Such comparisons must use equivalent cost definitions and take account of production mix, trading and downstream activities, asset depreciation and the fiscal terms under which each company operates. Converting naira figures into dollars does not resolve these differences.

The Guardian report itself acknowledges that the comparisons do not, on their own, establish operational efficiency. Its headline and overall framing should reflect that qualification. A ratio that combines production costs, commodity purchases, statutory charges and depreciation cannot, by itself, substantiate a conclusion that NNPC Limited is inefficiently operated.

Confidence grounded in audited disclosure
The 2025 financial statements were independently audited by PricewaterhouseCoopers. The auditor issued an unmodified opinion on the consolidated and separate financial statements, concluding that they fairly present the Group’s and Company’s financial position, performance and cash flows under the applicable financial reporting framework. This provides assurance on the financial statements; it is not a certification of operational efficiency.

Our confidence rests on the disclosed results and the ability of stakeholders to examine them. The accounts show an energy company delivering stronger earnings and operating cash flow, with improved margins and lower reported costs. They also provide a basis for continued scrutiny and further improvement.

We ask The Guardian to publish this clarification with appropriate prominence so that readers receive a balanced account. We encourage stakeholders to read the full financial statements and accompanying notes. NNPC Limited remains committed to transparent reporting and to improving the value it delivers to its shareholders and the Nigerian people.

Odeh is Chief Corporate Communications Officer, NNPC Limited.