Although the oil and gas sector is not yet at the heights before the coronavirus pandemic triggered a recession, Nigeria’s oil industry is picking up with a relatively better performance in the first quarter of 2020.
Nigeria’s oil industry started 2021 on a positive note thanks to a combination of relatively higher oil production of 1.72mpd and favourable average Brent of $64 as oil GDP contracted by -2.21 percent in Q1 2021, according to data from the National Bureau of Statistics (NBS).
This is higher compared to a contraction of 19.76 percent in Q4 2020, but slower compared to a pre-pandemic growth level of 5.06 percent in Q1 2020.
The oil sector accounted for 9.25 percent of aggregate real GDP in Q1 2021, slightly lower than 9.5 percent recorded in Q1 2020 but higher than the 5.87 percent in the preceding quarter.
“The effect of the coronavirus pandemic caused maintenance worries for most oil assets, which affected oil production. However, things are gradually improving,” Kelvin Atafiri, who runs Cavazanni Human Capital Limited, an investment firm involved in the oil and gas sector, said.
In Q1 2021, average daily oil production stood at 1.72mbpd lower than the average pre-pandemic production level of 2.07mbpd recorded in Q1 2020, but higher than the production volume of 1.56mbpd in Q4 2020.
During the pandemic, oil companies across Nigeria struggled to move workers to where they were needed due to lockdowns that vary by state; and regulations from the petroleum regulator limiting the number of workers at oil site also complicated operations.
Rivers State, home to the oil hub of Port Harcourt, was under a lockdown so strict that the governor arrested 22 oil workers who landed there, despite Federal Government permits allowing them to travel.
“Most of Nigeria’s oil assets affected by the effect of COVID-19 are slowly crawling back to pre-pandemic level while favourable oil price is also a major boost in enhancing more exploration,” Charles Akinbobola, energy analyst at Lagos-based Sofidam Capital, said.
Brent, the benchmark for Nigeria’s crude oil, is also improving in 2021 as crude prices rose above $70/barrel over the weekend but fell on Monday on renewed demand concerns, as COVID-19 cases in Asia rose and fears that rising inflation might lead the US Federal Reserve to raise rates, which could limit growth.
Akinbobola also advised the Federal Government to do more in attracting Foreign Direct Investments (FDIs) to Nigeria’s energy sector by creating a policy structure that will enhance ease of doing business.
Other experts in the oil and gas sector ranked reforming fiscal and regulatory terms by passing into law a competitive Petroleum Industry Bill (PIB) as the most urgent task needed to make an oil sector record a two-digit growth rate. Next is domesticating the value chain and also ensuring the oil and gas sector provides linkages across the economy.
Hopes were raised that the PIB would be passed by the parliament by the first quarter of 2021, but this did not materialise.
Nigerian oil minister of state, Timipre Sylva, said the executive arm of the government was in talks with lawmakers to ensure the passage of the PIB by June this year.
Africa’s biggest oil-producing country is also very keen to grow its gas resources as oil export revenues continue to taper.
