Decline in Crude Oil Production Causes Nigeria to Lose N636bn in Five Months
- Nigeria, a top oil-producing country continues to suffer from a decline in production, amounting to severe losses for the country
- Frequent pipeline vandalism and crude oil theft have been the major causes of the decline in Nigeria's oil output
- This has sparked the NNPC Limited to advocate for a special court to prosecute those involved in these crimes
Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.
Since January 2024, Nigeria has experienced a consistent decline in its monthly oil production, leading to a revenue shortfall of approximately N636.3 billion.
Data from a Federal Government agency revealed that Nigeria's crude oil production (excluding condensates) stood at 1.43 million barrels per day (mbpd) in January but fell to 1.25 mbpd by May.
Source: UGC
According to figures from the Nigerian Upstream Petroleum Regulatory Commission, the total crude output in January was 44.22 million barrels, which decreased to 38.8 million barrels in May.
This decline signifies a reduction of 5.43 million barrels in crude oil production from January to May this year.
Nigeria's oil production decline
According to data from Statista, an international statistical firm, the average price of Brent crude oil, the global benchmark, was $80.12 per barrel in January and increased slightly to $81.75 per barrel in May.
Additionally, the average exchange rate of the naira against the dollar in May was 1,434.1/$.
The naira has been under pressure since the Central Bank of Nigeria unified the country's foreign exchange markets on June 14, 2023.
Given the 5.43 million barrel decrease in crude oil production, the price of Brent, and the exchange rate in May, Nigeria incurred an estimated revenue loss of about N636.3 billion between January and May.
The report noted that Nigeria's crude oil production fluctuated over the first five months of the year.
Starting at 1.43 million barrels per day (mbpd) in January, output decreased to 1.32 mbpd in February and further declined to 1.23 mbpd in March.
Production then saw a slight increase to 1.28 mbpd in April, before dropping again to 1.25 mbpd in May.
Causes of oil production decline
The persistent decline in Nigeria's oil production has been attributed to frequent pipeline vandalism and crude oil theft.
Despite the government's efforts to tackle this problem, success has been limited.
Major oil companies have expressed concerns about how oil theft and pipeline vandalism are affecting crude supply to local refineries.
For example, on June 13, 2024, the Nigerian National Petroleum Company Limited called on the judiciary to establish a special court to prosecute those involved in oil theft and pipeline vandalism.
Speaking on the matter, Wale Ogundeji, an energy analyst, agrees that issues of pipeline vandalism and crude oil theft are responsible for Nigeria's crude oil production decline.
He said:
"These illegal activities have severely disrupted the oil supply chain, causing significant production losses.
"The government's efforts to curb these issues have been inadequate, further hampered by regulatory challenges and corruption.
"Consequently, these factors have collectively led to a consistent drop in oil output, resulting in substantial revenue losses and impacting the country's economic stability."
He added that addressing these challenges is crucial for stabilizing and revitalizing Nigeria's oil industry.
Nigeria among top 5 oil-producing countries in Africa
In related news, Legit.ng reported that Nigeria produced the most oil for April despite falling short of its output.
This is according to data from the Organisation of Petroleum Exporting Countries (OPEC), which shows that global oil prediction for 2024 remains the same.
Oil production declined in most OPEC members in Africa during the first quarter of 2024, except for Algeria, Libya, and Congo.
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Source: Legit.ng
