Nigeria, Africa’s largest oil producer, has once again fallen short of its OPEC (Organisation of Petroleum Exporting Countries) oil production quota, raising concerns about the country’s economic stability. Despite continuous assurances, the nation produced over 560,000 barrels per day less than its allocated quota in August 2023, equating to approximately 17.3 million barrels.*
An analysis conducted by THISDAY, using data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), revealed that Nigeria’s oil production increased slightly from 1.08 million barrels per day in July to 1.18 million barrels per day in August. However, this figure remains far below the 1.742 million barrels per day quota allocated to Nigeria by OPEC.
This production deficit amounts to at least 560,000 barrels per day, with an estimated value of $1.47 billion (N1.12 trillion) in August, based on conservative oil prices of $85 per barrel and the official exchange rate of N765/$.
Nigeria’s struggle to meet its OPEC allocation dates back to the first half of 2020. The country has attributed this shortfall to issues such as crude oil theft and extensive vandalism of oil infrastructure.
In response to Nigeria’s persistent production challenges, OPEC decided to reduce the country’s production quota from 1.742 million barrels per day to about 1.38 million barrels per day by 2024. Nigeria has expressed its intent to discuss and potentially revise this decision with OPEC leadership in November.
Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), acknowledged Nigeria’s production deficit in July and stated, “Current production is nowhere near Nigeria’s capacity… The issues are around the pipeline, and once we are able to resolve the challenges, then, we can produce higher.” However, achieving this goal remains uncertain.
Earlier this year, the former Minister of State for Petroleum Resources, Chief Timipre Sylva, had expressed optimism about Nigeria reaching its OPEC quota of 1.8 million barrels per day by May 2023, contingent on improving pipeline security. Four months have passed since that projected timeline.
Despite assurances from government officials, Nigeria’s crude oil production faced setbacks in July, with production dropping to a three-month low of 1.081 million barrels per day due to ongoing issues like oil theft and a terminal leak in the Niger Delta.
The latest data from NUPRC for August reveals marginal production increases at some terminals but a loss of nearly 100,000 barrels at the Brass terminal, among other declines.
When considering condensates, which are not included in OPEC’s monthly calculations, Nigeria’s production in August reached 1.4 million barrels per day, up from 1.3 million barrels per day in July.
Nigeria’s precarious situation is further exacerbated by its foreign exchange (FX) crisis. Crude oil exports account for 80 percent of the country’s export revenue, and the 2023 budget projects crude production at 1.69 million barrels per day.
Recently, the Nigerian National Petroleum Company (NNPC) sought to borrow $3 billion from AfreximBank, but the status of the deal remains unclear amid reports of undisclosed details regarding fund utilization at the time of signing.
Nigeria’s FX challenges persist, casting a shadow over the country’s economic outlook as it grapples with meeting its OPEC production quotas and securing the vital revenue generated from oil exports.
The nation faces significant hurdles in balancing its oil production with economic stability while navigating the complexities of the global energy market.