Amid FX Squeeze, Nigeria Records 42m Barrels Oil Production Deficit in Five Months

Emmanuel Addeh in Abuja

As Nigeria continues to borrow to counter the prolonged reduced foreign exchange inflow into the economy, a THISDAY analysis of available data has shown that the country lost as much as 42 million barrels of crude oil to underproduction between January and May, 2024.

Data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) indicated that going by the 1.58 million barrels per day quota allocated to Nigeria by the Organisation of Petroleum Exporting Countries (OPEC), the country was supposed to produce 240 million barrels in the five months under review.

However, the data showed that Nigeria only managed to drill a volume of about 198 million barrels of crude oil, leaving a deficit of about 42 million barrels of OPEC-sanctioned production during the period.

At an estimated average Brent crude oil price per barrel of $85 in 2024, it showed that the country may have lost a gross revenue of $3.57 billion to its inability to meet the revised OPEC production quota of 1.58 million bpd so far this year.

Nigeria gets over 80 per cent of its foreign exchange earnings from the export of crude oil and is therefore highly negatively impacted by either falling crude oil production or prices in the international market. For a long time, crude oil prices have stabilised at over $80 per barrel, but Nigeria has failed to markedly raise output during the period.

The country has blamed oil theft, massive oil assets vandalism, deteriorating infrastructure in the country’s Niger Delta as well as years of underinvestment for its persistent inability to raise production significantly.

Nigeria in recent times, has resorted to borrowing to augment the little inflow of foreign exchange into the country’s FX market, first taking foreign loans of  $1.71 billion to boost FX into the country in the first nine months of 2023.

In August last year, Nigeria’s state-oil firm, the Nigerian National Petroleum Company Limited (NNPC) announced that it had secured a $3.3 billion crude oil repayment loan from Cairo-based Afrexim Bank that will support the government’s reforms to stabilise the exchange rate market.

The NNPC in a post it tagged, “Relief for The Naira,” said the loan will immediately help to disburse funds to support the government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.

Since the harmonisation of the foreign currency market segments in Nigeria one year ago, the naira has depreciated by an estimated 214.64 per cent against the dollar, closing at N1482.72 to a dollar last Friday, compared to the N471/$ it was selling at the government-controlled official market a year earlier.

Last week, the Board of the World Bank approved a $2.25 billion loan for Nigeria to shore up revenue and support economic reforms that have contributed to the worst cost-of-living crisis in many years for Africa’s most populous country.

The bank said in a statement that the bulk of the loan — $1.5 billion — will help protect millions who have faced growing poverty since a year ago when President Bola Tinubu came to power and took drastic steps to fix the country’s ailing economy, including fuel subsidy removal and floating of the Naira.

The remaining $750 million, the bank said, will support tax reforms and revenue and safeguard oil revenues threatened with limited production caused by chronic crude theft.

Despite repeatedly targeting a production of 2 million bpd crude oil for years, the country has failed to meet its OPEC quota, which was slashed from 1.74 million bpd last year to the current 1.58 million bpd.

But the NUPRC data showed that instead of the almost 49 million barrels required to meet its OPEC allocation for each of the five months, Nigeria produced 44.22 million barrels in January, the highest this year.

In February, the country produced 38.34 million barrels; 38.14 million barrels in March; 38.44 million barrels in April and 38.79 million barrels in May, all excluding condensates which are outside OPEC’s monthly computation.

Crude oil production from the Bonny terminal declined considerably from 6.35 million barrels in January to 3.6 million barrels in May of this year, while Brass also reduced from 735,680 barrels to 635,929 barrels during the same period.

In addition, output from Qua Iboe fell from 4.2 million barrels in the whole of January to 3.96 million barrels last month, while Forcados slumped from 7.7 million barrels to 5.9 million barrels in May 2024.

There was no major change in output at the Excravos facility, which was 4.1 million barrels apiece in January and May, while production from Odudu terminal fell marginally from 2.9 million barrels to 2.6 million barrels.

No production was recorded at all at the Aje, Asaramatoru, Okono, Anambra Basin, Ukpokiti and Ima facilities, although oil flow resumed at Utapate, and Ajapa.

A breakdown of the production information further showed that Nigeria produced 1.42 million bpd in January; 1.32 million bpd in February; 1.23 million bpd in March; 1.28 million bpd in April and 1.25 million bpd in May this year.

Nigeria, Africa’s biggest crude oil producer, also owns the second largest reserves of the resource on the continent. It also has over 209 Trillion Cubic Feet (TCF) in gas reserves, but is hardly able to get the required quantity out of the ground as a result of lack of investment and several bottlenecks in the sector.

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