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The World Bank has stated that technical problems, insecurity, rising production costs, theft, lack of payment discipline in joint ventures, etc. were responsible for the 40 per cent decline of Nigeria’s oil production last year.
The apex bank said in its January global economic prospects report that the fall, when compared to its 2019 level, lowered economic growth to 3.1 per cent from 3.6 per cent the prior year.
“Oil output dropped to 1 million barrels per day, down by over 40 percent compared to its 2019 level, reflecting technical problems, insecurity, rising production costs, theft, lack of payment discipline in joint ventures, and persistent underinvestment, partly because of the diversion of oil revenues to petrol subsidies, estimated at over 2 per cent of GDP in 2022,” the report said.
Annual inflation surpassed 21 per cent in 2022 for the first time in 17 years, disrupting activity and consumer demand, it said, adding that persistent fuel and foreign exchange shortages, with the country’s currency depreciating by over 30 per cent last year in the parallel market, further dampened economic activity.
World Bank also projected that the country’s growth will decelerate to 2.9 per cent in 2023 and 2024.
“The fiscal position is expected to remain weak because of high borrowing costs, lower energy prices, a sluggish growth of oil production, and a subdued activity in the non-oil sectors,” the bank said.
Nigeria is currently Africa’s second largest oil producer, after it was overtaken by Angola in May 2022, according to the Organisation of Petroleum Exporting Countries.
The country’s number one revenue source, crude oil, had crashed to an all-time low of 900, 000 barrels per day in September, according to OPEC data.
However, as of December, Chief Upstream Investment Officer, NNPCL Upstream Investment Management Services, Bala Wunti, said the country’s dwindling oil production was back up to about 1.6mb/d.
“Crude theft affects all architecture that funds the country. When the oil theft reached its peak, everything including gas production was affected.
“As at today, oil production is at 1.59 million barrels per day,” Wunti said at the 11th Practical Nigerian Content forum in Uyo, Akwa-Ibom state in early December.
A statement by the Ministry of Finance, Budget and National Planning had said the excess crude account crashed by 89 per cent in the last eight years, moving from $4.1bn in November 2014 to $472,513 in the same period of 2022.The balance as of November 23, 2022, stood at $472,513.64.
The account has depleted in the last eight years as a result of lack of inflows, oil market vagaries and the country’s revenue crunch, according to economists.
“It is a simple fact that when you spend money from an account and you are not adding to it, it will deplete,” Professor of Economics at Covenant University, Ogun State, Jonathan Aremu told The PUNCH when the announcement was made by the Federal Government.
“For you to increase the ECA, the oil price must rise above the budgeted price. If it does not, nothing goes in. Also, if what you are spending is higher than what goes in, it depletes. This is the situation,” he further said.
Experts have argued that Africa Nigeria inclusive needs to diversify its economy away from oil and gas.
Professor of Economics and Public Policy at the University of Uyo, Akwa Ibom State, Akpan Ekpo told The PUNCH during an interview, that despite crude oil retaining 80 per cent of the total trade, Nigeria needs to diversify as oil revenue is no longer reliable.
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