The latest data from the National Bureau of Statistics (NBS) has exposed the fragile state of Nigeria’s oil sector as the country’s oil GDP fell by 8.30 percent in 2021 compared to 8.89 percent in 2020,
In Q4 2021, the oil sector contracted in real terms by 8.06 percent (year-on-year) indicating an increase by 11.71 percent points relative to rate recorded in the corresponding quarter of 2020, NBS said in its quarterly report released on Thursday.
According to the NBS’ report, the oil sector contributed 5.19 percent to total real GDP in Q4 2021, down from figures recorded in the corresponding period of 2020 and down compared to the preceding quarter, where it contributed 5.87 percent and 7.49 percent respectively.
The above development mirrors the sorry state of Nigeria’s oil industry, and the government’s inability to use the sector as an engine t0 supply new jobs for Nigerian citizens and improve the social and living standards of its 200 million population just like other petrol-dollar economies.
According to experts, Nigeria’s 2021 oil GDP reflects Nigeria’s inability to attract investments for active exploration and persistent operational issues hold up oil production growth in Africa’s biggest oil-producing country.
Kelvin Atafiri who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector said Nigeria’s struggling production is responsible for the unimpressive GDP performance.
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“Power failure, industrial strike actions and production shut-in due to repairs at various terminals is bleeding Nigeria lots of crude oil production that can lift Nigeria’s economy,” Atafiri said.
If oil prices are bullish, as they were in 2021 with Brent crude averaging $70, the government earns more money and can fulfill its financial obligations.
When it earns less, as it did last year when crude bottomed out as it were, its financial capacity shrinks, sending the economy, which is reasonably dependent on government spending, to tailspin.
But the dynamics of oil is much deeper. Nigeria’s crude oil production has been languishing at only two-thirds of its full capacity this year, especially many of its large oil fields in the Niger Delta.
Key Nigerian grade Forcados had been disrupted for almost a month until Shell lifted force majeure on loadings September 10. Industry sources said the suspension of exports was due to an oil spill near the Forcados terminal.
Other Nigerian crudes such as Bonny Light, Escravos, and Qua Iboe have also faced production issues in recent months due to operational and technical reasons.
Dolapo Oni, an international oil and gas expert familiar with Nigeria’s petroleum sector says Nigeria’s top 10 oil fields over the last decade have shed over 25percent of output.
“These top oil fields were mostly replaced with many smaller oilfields, which were not fully optimized, therefore not sustainable,” Oni tweeted.
Industry data has also revealed Nigeria’s crude oil reserves declined by about 600 million barrels on the back of reducing investments in the last few years.
Information from the British Petroleum (BP) Statistical Review, 2021 indicated that between 2017 and 2020, a three-year period, Nigeria’s reserves did not grow, but rather fell from 37.5 billion barrels to 36.9 billion barrels in 2020.
“When was the last time a 100 kbd field came online in Nigeria?” Oni asked.
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