from OKORO CHINEDU in Lagos, Nigeria
LAGOS, (CAJ News) – PRODUCTION cuts, on the back of oil theft and infrastructural deficits, are accelerating the decline of Nigeria’s oil sector.
The West African country is the continent’s largest producer of the commodity.
The decline of the sector culminates in the drop of its contribution to the gross domestic product (GDP) of what is also the continent’s largest economy.
According to data from the National Bureau of Statistics, the oil economy declined by 11,8 percent year-on-year (y/y) in the second quarter (Q2) of 2022.
This is compared with 6,6 percent y/y drop recorded in Q1 2022.
The oil sector accounted for 6,3 percent to GDP compared to 6,6 percent recorded in the previous quarter.
Meanwhile, the non-oil sector contributed 93,7 percent highlighting the sector as the major driver of the economy, the Coronation Merchant Bank highlighted.
Data from the Organisation of the Petroleum Exporting Countries (OPEC) shows that Nigeria produced about 1,14 million barrels per day (mbpd) of oil in September 2022, compared with 1,18mbpd recorded in the previous month.
This is below the expected 1,6mbpd OPEC quota.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) noted that production from 13 out of 29 oil terminals declined between July to September.
Bonny, Brass and Forcados are the worst hit crude terminals.
The government of President Muhammadu Buhari in August reportedly awarded a pipeline surveillance contract worth N48 billion per annum (US$108 million) in a bid to address the oil theft menace in the Niger Delta region.
Since the awarding of the contract, some 58 illegal connections were discovered in the Delta and Bayelsa states.
Furthermore, the government disclosed that a probe mechanism had been setup to ensure culprits are prosecuted.
“Despite developments regarding clampdowns on illegal oil refineries and bunkering, Nigeria may struggle to fully benefit from the global oil market,” said Chinwe Egwim, Chief Economist at Coronation.
Meanwhile, the latest commodity output report released by the World Bank in October disclosed that the benchmark crude oil price, is expected to average $92 per barrel in 2023.
Egwim said in an oil producing economy like Nigeria, oil price increases should reflect more revenue dividend as it was expected to enhance foreign exchange earnings and build reserves.
“However, payment of petrol subsidy and low oil production occasioned by the activities of oil vandals have hampered oil revenue growth,” the economist said.
– CAJ News