Africa’s biggest oil producer, Nigeria, received a total of N4.7 trillion from domestic and foreign transactions of crude oil and gas operations in 2020, the lowest in three years according to the latest data from the Central Bank of Nigeria (CBN) has revealed
Nigeria relies on crude oil sales for around 90percent of its foreign exchange earnings and more than half of government revenue.
According to the CBN’s quarterly economic reports for 2020, Nigeria’s business transaction in crude oil and gas export, Petroleum Profit Tax (PPT), and royalties generated N1.5 trillion in Q1 2020, which decreased marginally to N1.2 trillion, thanks to rising economic effect of COVID 19.
In the third quarter of 2020, oil revenue declined to N953 billion, but increased to N985 billion in the fourth quarter, yielding a combined N4.7 trillion revenue for the year.
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“The low contribution was attributed to weakening global crude oil demand, due to the COVID-19 pandemic, and low domestic crude oil production, sequel to the subsisting Organisation of Petroleum Exporting Countries (OPEC) + production cut agreement,” CBN said in its latest fourth-quarter economic report.
The report noted that Nigeria’s crude oil production, including Agbami, recorded an estimated decline of 0.01 million barrels per day (mbpd) or 0.7 per cent, to an average of 1.52 mbpd in the fourth quarter, compared with the 1.53 mbpd produced in the third quarter.
This was the lowest output since 2016 when Niger Delta militants repeatedly attacked key oil infrastructure pushing the country’s production to as low as 1.4 million-1.5 million bpd at points that year.
“Nigeria’s production was expected to increase from January 2021,” CBN explained.
Most experts say its unlikely that production will increase this year unless the Federal Government implements key reforms in energy’s sector.
This will begin with the passage of the Petroleum Industry Bill aimed at overhauling the oil sector and enacting new fiscal and regulatory regimes.
Lawmakers unduly delaying the oil-sector reform bill while key projects including new licensing rounds for shallow offshore and deep offshore oil blocks have stalled.
Not only are new investments not coming, oil companies are selling off their assets and leaving the country on account of insecurity and other production challenges.
Chevron is selling assets in Nigeria. Total’s stake in the profitable Bonga offshore field is also on the block, while ExxonMobil is looking to shed Nigerian fields as part of a global retrenchment strategy.
Fiscal uncertainty has delayed a decision on a multi-billion expansion, known as Bonga Southwest, by Royal Dutch Shell and its partners.
In its latest bi-monthly economic bulletin, the Financial Derivatives Company (FDC) said lack of reforms is a major risk facing Nigeria’s oil and gas sector.
“With the gradual shift to electric vehicles, oil is gradually becoming obsolescent and this will lead to a drop in investment by the oil majors,” FDC said.
