As oil prices continue to soar on the global market, Nigeria has failed to profit from the price ascendancy other oil-producing countries are benefitting from as a result of the Russia-Ukraine crisis. OPEC’s daily quota for Nigeria stands at 1.83 million, but the country’s daily production for August 2022 was 972,394; compared to 1.083 million barrels in July 2022. Nigeria has now lost its place to Angola as Africa’s largest oil producer, with Libya also on the shoulders of the West African giant.
For Nigeria, producing more oil is important for the economy as the country has been widely described as an oil economy, due to its dependency on oil. A change in oil prices has significant effects on the macroeconomy. However, despite a surge in oil prices, the country has consistently failed to meet OPEC’s quota and its production has continued to drop on a daily basis. One of the reasons why Nigeria cannot produce 2 million barrels per day is oil theft. The last time Nigeria produced close to 2.5 million barrels a day “the supposed oil capacity” was over a decade ago.
Nigeria has 2.1% of the global oil reserves, the USA has about 4%. But while the United States produces about 11.8 million barrels per day, Nigeria is still gasping for breath at the average 1.3 million mark.
Oil theft is the greatest enemy of the oil and gas industry in Nigeria. Despite efforts to curb this menace, there has been an incessant rise in the volume of oil stolen daily. Surveillance contracts worth billions of naira are now distributed to private individuals to put an end to it – a ludicrous indictment on the Navy and other security apparatus in the country. According to the Group Managing Director of NNPC, Mele Kyari, Nigeria loses 200,000 barrels of crude oil per day, in an organized scheme of crime that spans all levels of society. According to reports, the production capacity fell 857,000 bpd short of production, which shows that Nigeria loses $85.76 million daily, and $2.658 billion for the month of August.
The country has also been faced with having to cut short its production, and to mitigate having to lose more; this has hampered production. According to reports, the NNPC has been forced to cut short production in some of its pipelines. the Trans Niger pipeline, which produces about 16% of the country’s oil has suffered so much theft. Also, some of its pipelines have suffered much vandalism, the pipelines have been forced to shut down operations. According to Mele Kyari, there’s a possibility of the country producing around 700,000 barrels per day.
Illegal refineries also mean Nigeria cannot produce 2 million barrels per day. The chain of illegal refineries has created a reduction in Nigeria’s production capacity. Illegal refining of oil stems from oil theft; after oil is stolen from pipelines, the oil is then transported to different illegal sites where it is refined, thereby also causing degradation to the environment where they operate, due to the hazardous nature and not paying attention to safety measures. After refining, the oil is transported and loaded on different vessels and sold to neighbouring countries. The oil doesn’t account into Nigeria’s books.
The moribund nature of Nigeria’s refineries also has an effect on Nigeria’s production. Nigeria imports almost all of its fuel. The cost of importing oil, according to the World Bank, is expected to exceed N5trillion for 2022, which is over 300% of what was spent in 2021. The figure also represents about 25% of Nigeria’s 2022 budget.
Earlier, Nairametrics reported that the minister of state for resources, Timipre Sylva, announced that Nigeria was committed to meeting up with OPEC’s quota in August, but instead the production dropped. The effects of not meeting up to the quota pose serious economic threats to Nigeria as oil is Nigeria’s mainstay.
Also, Nigeria risks losing its place as a major player in the global oil market. Solving oil theft is important to increasing Nigeria’s production as the number of barrels stolen daily, if added to production, would shoot up Nigeria’s production capacity. Also, more security measures through technology and relevant agencies should be provided to help production at pipelines at full capacity,
