The Federation Account Allocation Committee (FAAC), which manages the distribution of Nigeria's oil revenues to the three tiers of government, said however that NNPC owes it a shortfall of 450 billion naira in unremitted crude oil receipts, according to Reuters.

"NNPC is insolvent as current liabilities exceed current assets," Babalola told a FAAC meeting in the capital Abuja.

"NNPC is incapable of repaying the 450 billion naira owed to the Federation Account unless it is reimbursed the 1.156 trillion naira (in subsidies) it has requested from the federal ministry of finance," he said.

Despite being Africa's biggest oil and gas producer, Nigeria is reliant on imports to meet its energy needs. Its four refineries are in disrepair, but even at full capacity they would only meet around a quarter of domestic energy demand.

Most people in Africa's most populous nation see subsidised fuel as the only tangible benefit of their nation being a major world oil producer. The government has said it wants to remove the subsidies, which cost upwards of $4 billion a year, but such a move is likely to meet with popular resistance.

NNPC buys crude oil at the prevailing international market rate but sells petroleum products to local marketers at a discount in order to keep pump prices artificially low. The government is supposed to subsidise the difference.