Estimated reading time: 9 minute(s)
For two consecutive months – January and February – Nigeria failed to meet its quota as allocated by the Organisation of Petroleum Exporting Countries (OPEC).
In its March report released yesterday, OPEC said Nigeria produced 1.399m barrels per day in January and 1.25 million barrels per day in February.
This is far below the 1.7mb/d allocation for January and 1.8mb/d for February
The report added that Nigeria maintained an average daily oil production of 1.424mb in 2021.
It did not, however, give reasons why the country could not meet its quota.
OPEC said: “According to secondary sources, total OPEC-13 crude oil production averaged 28.47 mb/d in February 2022, higher by 0.44 mb/d month -on-month.
It noted that Crude oil output increased mainly in Saudi Arabia and Libya, while production in Nigeria and Equatorial Guinea declined.
It further explained that Saudi Arabia is on top of the list as the highest producer with 10.225mb/d exceeding the 10mb/d that the Organization approved for it in the month under review.
Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mele Kyari, had blamed the country’s inability to meet its OPEC quota on lack of funding.
He said financing was badly needed to improve the country’s production capacity.
According to him, following the decision to allow more oil in the market, Nigeria and other members of OPEC would face challenges to quickly pump more oil.
“Even if OPEC members decide to pump more oil it may not be very, very realisable as the financing needed for more development is lacking,” Kyari said in an interview with Bloomberg Television.
A report by Cordros Capital indicated that Nigeria’s oil sector contracted for the seventh consecutive quarter with a negative growth print of 8.1 per cent in fourth quarter 2021, bringing 2021 full year oil sector negative growth to 8.3 per cent.
However, providing some comfort was the trend of slowing contraction in the oil sector as the negative growth of 8.1 per cent in fourth quarter 2021 was 4.6 percentage points and 2.7 percentage points slower than the 12.7 per cent and 10.7 per cent contraction in second quarter 2021 and third quarter 2021.
According to the report, the sustained contraction in oil sector GDP remains down to persistent reduction in crude oil production.
For context, data from the National Bureau of Statistics (NBS) showed that crude production averaged 1.5mb/d in Q4-2021, 3.8 per cent and 4.4 per cent lower than fourth quarter-2020 and third quarter 2021’s 1.6mb/d.
In addition, average crude oil production for full year 2021 printed at 1.6mb/d, 10.0 lower than full year 2020’s average of 1.8mb/d.
According to analysts, the steady decline in oil production is directly associated with operational and maintenance issues, supported by incessant pipeline vandalism, which has prevented Nigeria from meeting its OPEC+ production quota, despite upward adjustment that has seen Nigeria’s production quota rise to 1.72mb/d (excluding condensates).
In addition, capital expenditure investment in the oil and gas sector continues to lag below pre-pandemic levels, despite oncoming of the Petroleum Industry Act.
As a result of contraction in the sector’s output, contribution to real GDP in 2021 declined to 7.2 per cent as against 8.2 per cent in 2020 down by 1.0 percentage points. For additional context, oil sector contribution to real GDP prior to the Covid-19 outbreak was 9.5 per cent in first quarter 2020.