Nigeria’s oil sector grew –0.85% in Q3/2023. This is according to the Gross Domestic Product (GDP) report recently released by the National Bureau of Statistics (NBS).
The report highlights the fact that in the third quarter of 2023 (Q3/2023), the growth rate in the oil sector was -0.85% year-on-year in Q3 2023.
However, what may seem like a decline is an improvement from what the oil sector growth rate was in the corresponding quarter of 2022 as well as the previous quarter (Q2/2023).
In Q3/2022, the oil sector growth rate was -22.67%. Also, compared to the previous quarter (Q2/2023), which was -13.43%, there was a positive increase of 12.58% points.
A part of the report stated:
- “The real growth of the oil sector was –0.85% (year-on-year) in Q3 2023, indicating an increase of 21.83% points relative to the rate recorded in the corresponding quarter of 2022 (-22.67%).
- Growth also increased by 12.58% points when compared to Q2 2023 which was –13.43%. On a quarter-on-quarter basis, the oil sector recorded a growth rate of 12.47% in Q3 2023.”
According to the GDP report, Nigeria’s oil industry showed some improvements in production. The average daily oil output was 1.45 million barrels per day (mbpd), which was higher compared to both the same period in 2022, which was 1.20 mbpd, and the second quarter of 2023, which was 1.22 mbpd.
This increase in production was by 0.25 mbpd from last year’s Q3 and by 0.23 mbpd from Q2 this year.
Looking specifically at the quarter-by-quarter performance, the oil sector in Q3 2023 experienced a growth rate of 12.47%. This means it saw a good expansion compared to the previous quarter.
Meanwhile, in terms of its contribution to the total real GDP, the oil sector contributed 5.48% in Q3 2023.
This is slightly lower than what it contributed to the country’s GDP in the same period of 2022 but higher than what it contributed in the previous quarter of 2023.
Specifically, it contributed 5.66% in the corresponding quarter of 2022 and 5.34% in the preceding quarter.
Overall, while there were fluctuations in the oil sector’s performance, there was a noticeable increase in production and a positive trend in growth rates, showcasing some improvements in this industry.
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The improvements seen in the oil sector in 2023 can be linked to several factors. The federal government has shown a strong commitment to enhancing the living conditions of people residing in the Niger Delta region.
This region, historically affected by crude oil theft, has posed challenges to oil production. Addressing the living conditions here is crucial to combatting complicity in oil theft, ultimately boosting oil production across the country.
Also, the government has been actively engaging with oil operators—both local and foreign companies—to address various challenges and kickstart the implementation of the Petroleum Industry Act (PIA).
The PIA’s implementation is pivotal for boosting the country’s oil production processes and fostering better conditions for efficient operations.
This engagement with oil operators isn’t limited to PIA implementation; it also focuses on encouraging increased investments in upstream oil activities.
By fostering a supportive environment for investments, the aim is to attract more resources and expertise into the sector, ultimately enhancing oil production capacities in Nigeria.
As noted in September 2023, the Special Adviser to President Tinubu on Energy, Ms. Olu Verheijen disclosed significant investment opportunities with an estimated $55.2 billion in investments projected by 2030, of which $13.5 billion is expected to be invested by leading oil and gas companies operating in Nigeria within twelve months from September 2023.
Globally, when a sector’s performance drops by -0.85%, it’s usually seen as a sign of contraction, not growth. It’s also surprising that this report doesn’t highlight the elephant in the room: Nigeria’s oil and gas sector hasn’t registered a single quarter of expansion at all since the end of 2019.
This indicates more than a cyclical downturn driven by oil prices; it suggests deeper systemic challenges that need addressing. Presently, the oil and gas sector, far from being a growth driver, appears to be impeding Nigeria’s overall economic performance, necessitating urgent and strategic interventions to reverse this trend.
I have serious doubts that the Petroleum Industry Act (PIA), which has been in effect since 2021, will effectively address the ongoing decline of Nigeria’s oil and gas industry.
Maybe it’s time to acknowledge that the era of oil is coming to a close in Nigeria.