Nigeria, among Africa’s largest producers of crude oil, will need to raise production by at least 300,000 to 400,000 barrels a day to meet President Bola Tinubu’s aggressive target of achieving 6% economic growth from next year.
That’s according to Bank of America sub-Saharan Africa Economist Tatonga Rusike, who said that restoring crude output to levels last achieved in 2014 could prove tough.
“The target is ambitious as long as we continue to see oil production below 1.3 million barrels a day,” he said in an interview this week, noting that the revenue generated by Nigerian oil provides an important economic support.
The country produced 1.18 million barrels a day of crude in August, up from a revised 1.09 million barrels a day in July, according to data on Wednesday from the Nigerian Upstream Petroleum Regulatory Commission. That’s nearly 600,000 barrels below its OPEC quota of 1.7 million barrels a day, which it has been unable to meet this year.
Nigeria’s economy grew 2.5% in the three months through June from a year earlier, compared with 2.3% in the prior quarter after the oil sector contracted for a 13th straight quarter. The country has suffered two economic recessions since 2015, with growth averaging 1.1% over the period.
Tinubu, who took office in May, pledged to raise the growth rate to 6% or more and has initiated sweeping reforms to boost the economy, including ending costly energy subsidies, relaxing the exchange-rate regime and overhauling the country’s tax system to lift revenues.
Olaniyi Yusuf, chairman of the Nigerian Economic Summit Group, said that Tinubu’s growth goal was achievable — if the energy sector steps up.
“Our sense is that the greatest lever for us is crude oil,” he said in a separate interview, arguing that if the country can advance oil production to 1.6 million barrels a day, economic growth “will do up to 6% sustainably.”
Still, Nigeria’s persistently low oil production is a headwind and Bank of America has cut its growth forecast for Africa’s most populous country to 2.5% this year from an initial estimate of 3%.
“An increase in crude oil production to 1.6 million barrels a day could take growth to 4%,” Rusike said. But he cautioned that hitting that level of production is unlikely “unless there is a new field, or an old field that was not producing is reactivated.”
There will also be a time lag before Tinubu’s reforms begin to bear fruit.
“Positive reform momentum should influence economic performance for the rest of the year and into 2024,” he said.