Nigeria’s status as Africa’s largest oil-producing nation has suffered as the country is now the third-largest oil-producing country in Africa. For years, Nigeria maintained its status as the continent’s leading oil producer. In September 2022, Naijaonpoint reported that Nigeria has lost its place to Angola as the top oil producer in Nigeria.
The production rate redeemed a bit in October 2022; The Organization of the Petroleum Exporting Countries (OPEC) Monthly Oil Markets Report (MOMR), as previously reported by Naijaonpoint, has shown Nigeria to be in third position. Nigeria now produces 1,014 million barrels per day (mbpd), with Algeria’s 1,060 mbpd and Angola’s 1,051 mbpd in first and second place respectively.
The big problem: For decades, the Nigerian economy has been heavily dependent on crude oil as its main source of income. In the second quarter of 2022, crude oil tops the list of items exported by the country, according to the National Bureau of Statistics (NBS). While Nigeria exported N7.41 trillion worth of items, N5.9 trillion representing 79.77% was crude oil. With a reduction in production capacity, Nigeria’s revenues fell simultaneously.
Furthermore, despite being the main source of income, the contribution of crude oil to Nigeria’s GDP is minuscule and contrasting. In the corresponding quarter of 2021 (Q2) oil contributed 7.42% to GDP; in the last quarter it contributed 6.63% to the GDP. This means that the oil industry’s contribution to GDP is further declining. According to the NBS, the information and communication technology (ICT) industry is the largest contributor to the economy with 18.44%.
Crude oil is Nigeria’s main source of foreign exchange earnings. In recent months, there has been a shortage of foreign exchange in the country, coupled with the strength of the naira against foreign currencies, especially the dollar has weakened. This month, the naira has traded at N800 to the dollar on the parallel market. With dwindling production capacity, the availability of FX has shrunk even further. Furthermore, oil consumption in Nigeria has been fluctuating since the beginning of the year. According to reports, the country consumes 538,000 barrels of oil daily. In some parts of the country, the lines are beginning to return to gas stations. This can be attributed to the production capacity of the country.
Way to go: Nigeria must chart a way forward to regain its first place as Nigeria’s top oil-producing nation in Africa.
One of the ways Nigeria can regain its top spot is to stop oil theft. According to the managing director of the NNPC group, Mele Kyari, he pointed out that oil theft has been ongoing for more than 22 years in the country. According to reports, Nigeria loses around 600,000 barrels of oil per day due to oil theft. According to OPEC figures, the addition of 600,000 barrels will automatically make Nigeria the largest oil producer in Africa. Also related to this is vandalism, the Nigerian government earlier awarded a contract to Tantita Security Services Nigeria Limited, owned by former Niger Delta activist Government Empemupolo, also known as Tompolo, to secure pipelines in the Niger Delta.
Furthermore, the country has been battling production shutdowns. According to Mele Kyari, the Brass, Forcados and Bonny terminals have been closed for months due to vandalism and oil theft. In addition to increasing production, terminals must be secured to ensure that crude oil shipped to the terminals gets there without being diverted along the way by criminals.
The country has also been struggling with technology shortages in the industry. Nigeria currently spends $17 to produce a barrel of oil, and could sometimes rise to $21-$30. This has been attributed to a lack of technology and investment in the sector. Investing in the oil sector, especially in the technology aspect will help in the production of more barrels of oil and also in a much more effective way.
…Implications of the state of Nigeria’s oil production and the way forward Read more at… Naijaonpoint.