Despite oil prices trading at an average of $80 per barrel, the sector’s contribution to Nigeria’s Gross Domestic Production (GDP) dropped to an eight year low in the second quarter of 2023 indicating the fragile nature of the economy.
“The Oil sector contributed 5.34 percent to the total real GDP in Q2 2023, down from the figure recorded in the corresponding period of 2022 and down from the preceding quarter, where it contributed 6.33 percent and 6.21 percent respectively,” the National Bureau of Statistics, said.
Analysts say Nigeria’s oil contribution to the GDP reflects the country’s inability to attract investments for active exploration, as well as persistent operational issues that stymie oil production growth in Africa’s largest oil-producing country.
“The only way this can be revamped is more investment off and onshore and sustained effort by the security agencies to zero crude oil Theft,” Jide Pratt, the COO of Aiona and country manager of Trade Grid, said.
Daily oil production in Nigeria averaged 1.22 million barrels per day (mbpd) in the period, lower than the daily average production of 1.43 mbpd recorded in the same quarter of 2022 by 0.22 mbpd.
To curb oil theft, the Nigerian National Petroleum Company (NNPC) Limited has partnered with private security firms. It said 20 illegal pipeline connections were discovered, and 45 illegal refineries were destroyed in the Niger Delta recently.
“And between August 12 and 18, 2023, a total of 116 incidents were recorded across the Niger Delta, the war on crude oil theft is on,” the NNPC said. “Industry stakeholders and security collaboration is yielding remarkable results.”
Kelvin Emmanuel, the CEO of Dairy Hills Ltd, said the drop in contribution of oil and gas to 5.6 percent is proof of the lack of investments and policy implementation in increasing of drilling rigs deep offshore, the wanton crude oil theft that is organised and wreaked havoc on the export revenues of the government among other things.
He said the FG needs a clear path for bringing in institutional capital from International oil companies for increasing output deep-offshore, and co-investing to develop LNG capacity as well as export gas pipelines, as a tool to raise contribution to GDP.
According to the NBS data, the real growth of the oil sector was –13.43 percent (year-on-year) in Q2 2023, indicating a decrease of 1.66 percent points relative to the rate recorded in the corresponding quarter of 2022 (-11.77 percent).
Growth also decreased by 9.22 percent points when compared to Q1 2023 which was –4.21 percent. On a quarter-on-quarter basis, the oil sector recorded a growth rate of -14.12 percent in Q2, 2023.