How Nigeria can achieve 7% GDP growth with higher oil output

The federal government has revealed plans to double its economy in 2025, anchored on increased oil production and more involvement of the private sector after years of lukewarm growth.

Wale Edun, minister of finance and coordinating minister of the economy, said on national television on Monday that the Nigerian government’s ambition is to hit about seven percent per annum GDP growth.

“Because it is at that level you begin to lift people out of poverty,” he said. “In 2025, the country expects stronger revenue growth, higher oil production, continued savings from the non-spending of subsidies and greater ease of doing business to reach this lofty target.”

Edun said that one of the ways Africa’s most populous nation will boost its economy is to ‘crowd in the private sector’ to bridge the infrastructural deficit that has made the nation less attractive to investors.

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The minister stated that the country is clearing up all bottlenecks that could hinder private sector investment, assuring that all bureautic delays that are dampening investor sentiments are being addressed.

The government is looking to ramp up its oil production to over 2 million barrels per day this year, building on the 1.5 million barrels per day (bpd) threshold crossed in crude oil production, surpassing its December 2024 quota set by the Organization of Petroleum Exporting Countries (OPEC).

Petrodollars is Nigeria’s major FX earner. Improved oil production will, in no small way, boost the economy and improve the country’s per capita income.

Oil assets

Oil receipts fund the country’s budget, but many oil and gas projects lie idle, threatening the target set over a decade ago to raise reserves to 40 billion barrels.

These big-ticket projects include: Zabazaba 150,000 bpd; Shell’s Bonga South West, 225,000bpd; Bonga North project, 100,000 bpd; Chevron Nsiko project,100,000 bpd; Exxonmobil’s Bosi; 140,000 bpd; Satellite Field development phase, 80,000 bpd, and Ude 110,000 bpd.

Oil experts surveyed by BusinessDay said Nigeria’s path to economic prosperity may lie in optimising idle assets, a development that will require disciplined planning, economic reforms and consistent government policies that can inspire investors’ confidence.

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“Officials at both regulatory agencies and other agencies still demand bribes to attend to licences and approvals, and the delay in the process and bureaucratic obstacles did not change,” a senior industry source, who pleaded not to be quoted, said.

Under-investment

When an oil executive said Nigeria needed $25 billion per annum in investments to be able to achieve a production target of 2 million barrels daily, the task at hand for Nigeria came into better perspective.

The 2010s witnessed a period of significant foreign direct investment (FDI) from international companies eager to tap into the country’s vast oil and gas reserves as the future for Nigeria’s nascent indigenous upstream oil and gas industry looked bright, almost dazzlingly so.

In 2014, Nigeria attracted the largest amount of FDI of any African country, with inflows exceeding $22.1 billion. This influx of capital fuelled major projects, including deepwater exploration and development of new oil fields.

In the second quarter of 2024, oil FDI stood at $5 million.

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“Prioritising political interests over transparency and due process in asset sales has led to corruption, mismanagement, and ultimately, the underperformance of the sector,” Austin Avuru, executive chairman of AA Holdings, said at the Harvard Business School (Association of Nigeria) event in Nigeria’s commercial capital last year.

He noted that those who should manage the process for a smooth transition from oil majors to local operators turned it into an ‘approval power play.’

“Political connections rather than capacity became the qualifying criteria, in the absence of guidelines and defined processes,” Avuru explained.