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 producer of oil. In September 2022, Nairametrics reported that Nigeria has lost its place to Angola as the foremost oil producer in Nigeria.
The production rate racheted a bit in October 2022; the monthly oil markets report (MOMR) from the Organization of Petroleum Exporting Countries (OPEC) as earlier reported by Nairametrics has shown that Nigeria is in the 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 issue: For decades, the Nigerian economy has been largely dependent on crude oil as a major source of revenue. In Q2 of 2022, crude oil tops the list of exported items by the country, according to the National Bureau of Statistics (NBS). While Nigeria exported items worth N7.41 trillion, N5.9 trillion, representing 79.77% was crude oil. With a reduction in production capacity, Nigeria’s revenue fell simultaneously.
Furthermore, despite being the major source of revenue, the contribution of crude oil to Nigeria’s GDP is contrasting and minute. In the corresponding quarter in 2021 (Q2) oil contributed 7.42% to the GDP; in the last quarter, it contributed 6.63% to the GDP. This means that the contribution of the oil industry to GDP is further dwindling. According to the NBS, the Information and Communication Technology (ICT) industry is the largest contributor to the economy with 18.44%.
Crude oil is the major source of Nigeria’s foreign exchange earnings. In the last months, there has been a scarcity of FX 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 a dollar on the parallel market. With a dwindling production capacity, the availability of FX has further been dashed. Also, Oil consumption in Nigeria has been fluctuating since the start of the year. According to reports, 538,000 barrels of oil are consumed in the country daily. In some parts of the country, queues are beginning to return to petroleum stations. This can be attributed to the production capacity of the country.
Way forward: Nigeria must chart a way forward to regain its top spot 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 group managing director of the NNPC, Mele Kyari, he noted that oil theft has been ongoing for over 22 years in the country. According to reports, Nigeria loses around 600,000 barrels of oil per day to oil theft. Based on figures from the OPEC, the addition of 600,000 barrels will automatically make Nigeria the largest producer of oil in Africa. Also related to this is vandalism, the Nigerian government earlier awarded a contract to Tantita Security Services Nigeria Limited, owned by ex-Niger Delta militant, Government Empemupolo, also known as Tompolo to secure pipelines in the Niger Delta.
Furthermore, the country has been battling with production shut-ins. According to Mele Kyari, Brass, Forcados, and Bonny terminals have been shut down for months due to vandalism and oil theft. Aside from increasing production, the terminals should be secured to ensure that crude oil sent to terminals should get there without some being siphoned along the way by criminals.
The country has also been battling a shortage of technology in the industry. Nigeria currently spends $17 to produce a barrel of oil, and it 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 aspect of technology will help in the production of more barrels of oil and also in a much more effective way.
