Patrick Wolf mentioned this at ODTUG Kaleidoscope this year.

After you implement your first LOV in an APEX application you'll quickly learn about the %null% problem. APEX substitutes an empty string for Null return value as %null%.

They're several workarounds, like using "-1" as the NULL value. Or modifying your query using "'%' || 'null%'". For example:

SELECT ename,
       empno
  FROM emp
 WHERE empno = DECODE (:p_empno, '%' || 'null%', empno, NULL, empno, :p_empno)

Instead of using workarounds you can convert %null% to NULL (empty string) by creating the following application process:

Application Process: AP_SET_LOV_NULLS Process Point: On Submit - Before Computations and Validations

BEGIN
  FOR x IN (SELECT *
              FROM (SELECT item_name
                      FROM apex_application_page_items aapi
                     WHERE aapi.application_id = :app_id
                       AND aapi.page_id = :app_page_id
                       AND LOWER (aapi.lov_display_null) = 'yes'
                       AND aapi.lov_definition IS NOT NULL
                       AND aapi.lov_null_value IS NULL
                       AND ROWNUM > 0) x
             WHERE LOWER (v (x.item_name)) = '%' || 'null%') LOOP
    apex_util.set_session_state (x.item_name, NULL);
  END LOOP;
END;