The Federal Government has recorded its first revenue from crude oil sales in September 2023 after a year of zero revenue.
This significant development was highlighted in the latest edition of the Central Bank of Nigeria’s (CBN) quarterly statistical bulletin.
The data revealed that the government successfully accrued N3.09 billion from crude oil transactions in September 2023.
This occurrence is noteworthy as the last recorded revenue from this source was in August 2022, amounting to a modest N563 million.
The context of this financial milestone is critical, considering Nigeria’s substantial oil reserves.
Despite these resources, the Federal Government had been experiencing a prolonged revenue drought from crude oil sales.
Furthermore, the CBN’s data underscores an equally concerning trend in the natural gas sector, where the country has seen virtually no revenue for almost two years.
Therefore, this recent uptick in crude oil revenue marks a potential turning point in Nigeria’s resource-based income streams.
Other Sources of Oil Revenue
In a detailed analysis, Nairametrics observed that the revenue garnered from crude oil sales in September 2023, while significant, constituted a mere 1.30% of Nigeria’s gross oil revenue for the month, which was about N238.02 billion.
This finding highlights the diverse nature of the country’s oil revenue streams.
The major source of oil revenue for the government in that month was for miscellaneous payments that include pipeline fees, making a total of about N108 billion.
Following closely, oil and gas royalties made a considerable impact, adding N80.17 billion to the government’s coffers. This figure underscores the ongoing importance of royalties in Nigeria’s oil and gas revenue landscape.
The Petroleum Profit Tax (PPT) was another noteworthy contributor, bringing in N41.6 billion in September 2023. The PPT, a critical fiscal instrument in the Nigerian oil sector, reflects the government’s earnings from the profitability of oil companies operating within the country.
This diverse revenue composition underscores the multifaceted nature of Nigeria’s oil income, extending beyond crude oil sales. It also highlights the government’s reliance on various channels, including royalties, taxes, and fees, to maximise its earnings from the nation’s abundant natural resources.
More Insights
- The Nigerian oil sector, a critical pillar of the nation’s economy, has been facing a myriad of challenges. This has prompted significant actions and discussions at various government and international levels.
- The gravity of the situation led Hon. Tajudeen Abbas, the Speaker of Nigeria’s House of Representatives, to initiate a Special Ad Hoc Committee on oil theft. This committee is tasked with probing the alarming increase in pipeline vandalism, illegal oil bunkering, and theft. Abbas highlighted a staggering loss for Nigeria: over 300,000 barrels of crude oil daily, amounting to N1.29 trillion annually, were lost due to these criminal activities.
- The international dimension of Nigeria’s oil woes was brought to the fore by Ms. Emmanuelle Blatmann, the outgoing French Ambassador to Nigeria. She observed that the intensifying Russia-Ukraine conflict is pushing European countries to seek alternative oil sources, but they are turning away from Nigeria partly due to the country’s struggles with fulfilling oil contracts.
- Reflecting these challenges, the Federal Government has consistently fallen short of its revenue targets from the oil sector in recent years. In 2022, only 35.4% of the targeted oil revenue was realised, a stark shortfall from the planned N2.19 trillion, with just N776.35 billion being generated. The trend continued into 2023, with only about 79.3% of the target met between January and September.
- The National Bureau of Statistics (NBS) released a Gross Domestic Product (GDP) report showing a contraction of 0.85% in the oil sector in Q3/2023. However, this decline is an improvement from the -22.67% and -13.43% growth rates recorded in the corresponding quarter of 2022 and the previous quarter (Q2/2023).
- The slight improvement in oil revenue in 2023 has been attributed to the current administration’s efforts in enhancing the living conditions of Niger Delta people, engaging oil operators, and fostering an environment conducive to investment in the sector.
- Looking ahead, the Federal Government has set a conservative oil price benchmark of $77.96 per barrel and a daily production estimate of 1.78 million barrels per day (mb/d) for 2024. However, this target could be overly optimistic, given OPEC and its allies’ resolution to enforce crude oil production cuts.
- In an S&P Global Commodity Insights report, Clementine Wallop, a senior adviser at political risk consultancy Horizon Engage, opined that Nigeria’s oil sector continues to struggle, and the administration led by Bola Tinubu has a lot of work to do in revitalising this critical economic sector.