The oil sector contracted by 10.73 percent year-on-year and contributed just 7.49 percent to the total real Gross Domestic Product (GDP) in the third quarter (Q3) of 2021 in spite of the amount invested in the sector since oil was discovered in Nigeria.
Quarter-on-Quarter, the oil sector grew by 12.05 percent in Q3 2021. The Oil sector contributed 7.49 percent to total real GDP in Q3 2021, down from 8.73 percent recorded in the corresponding period of 2020 and up compared to the 7.42 percent filed in the preceding quarter.
In the third quarter, Nigeria failed to up crude oil production despite oil prices trading at over $80 per barrel. Crude oil production was 1.57 million barrels per day (mbpd) on average, down from 1.67 mbpd achieved in the same quarter of 2020. Another indication that Nigeria is still struggling to up production due to its outdated oil infrastructure and high cost of production.
In the latest report by the National Bureau of Statistics (NBS), the non-oil sector remains the powerhouse of the Nigerian economy, growing at 5.44 percent in real terms in the third quarter and contributing 92.51 percent to the nation’s economy.
Breaking down sectorial performance in the third quarter, services subsector contributed 49.65 percent to real GDP while industries and agriculture added 20.41 percent and 29.94 percent, respectively.
Trade, Telecommunications, Financial Institutions, Manufacturing, Agriculture, and Transportation and Storage all recorded positive growth even with the inflation rate hovering around 16 percent year-on-year during the period.
Despite the tough operating environment and other bottlenecks like an increase in electricity tariffs, import duty, high foreign exchange rate, and drop in consumer spending, the non-oil sector contributed over 92 percent to real growth in the third quarter, suggesting that more investment and a conducive environment would have deepened the sector growth.
Nigeria’s economy grew by 4.03 percent in the third quarter of 2021, slightly slower than the 5.01 percent recorded in the second quarter of the year but authenticate the nation’s resilience post-Covid-19.
Nigeria Records Zero Revenue from Oil Export in September
Nigeria was unable to obtain any revenue from oil exports throughout the month of October, despite recording an average daily oil production of 1.4 million barrels in the month of September.
The Nigerian National Petroleum Corporation (NNPC) revealed this in the corporation’s report to the Federal Account Allocation Committee (FAAC) which was released over the weekend. The report, which was published on the corporation’s website confirmed that even though it had produced more than 1 million barrels of crude oil, it was unable to sell the oil.
This reminds one of 2019, where more than 104 million barrels of oil which were lifted were unable to be accounted for by the NNPC in an auditor general report that was released recently. The NNPC revelation is similar to the auditor general’s 2019 report, concerning why there was no record of any money received for more than the 104 million barrels of oil that had been lifted.
A part of the report reads: “Sales receipt: No Crude Oil export revenue for the month of September 2021.”
The report went ahead to note that in total, the NNPC crude oil lifting of 11.49 million barrels in Export & Domestic Crude in September 2021 saw an increase of 98.5 percent relative to the 5.79 million barrels lifted in August 2021.
In spite of the lack of revenue for the NNPC through oil exports, the report stated that a sum of N252.96 billion was the Gross Domestic Crude Oil and Gas revenue for October 2021.
In the report, NNPC stated that Domestic Gas and other receipts throughout the month sat as N6.78 billion. Domestic Gas (NGL) in the month was just over N4 billion.
Concerning expenses, the NNPC stated that strategic holding cost, pipeline repairs across the month of September took a total of N7.75 billion. It broke the expenses down, stating that the pipelines came at a cost of N143 million and a value shortfall of N163 billion.
Oil Gains on Saudi Arabia Price Increase
Crude oil rose on the back of Saudi Arabia’s announcement that it has increased January oil prices to Asian and US customers.
Brent crude oil, a global benchmark against which Nigerian oil is priced, appreciated to $71.90 a barrel on Monday at 12:12 pm Nigerian time after plunging to as low as $65.73 a barrel on Thursday.
Saudi Arabia on Sunday announced it had raised January official selling prices for all crude oil grades sold to Asia and the United States by up to 80 cents from the previous month.
This was on the same day reports from South Africa suggested that Omicron was less harsh than previously thought. Still, it was uncertain why one of the world’s leading oil producers raised prices at a time OPEC + is upping production by 400,000 barrels per day and when uncertainty surrounding covid could erode global demand and force existing buyers to embrace competing grades.
“I am struggling to construct a positive narrative out of Saudi Arabia raising prices, especially as it makes competing grades more appealing to their client base. The best I can do is that Saudi Arabia feels confident raising prices despite higher OPEC+ production because it believes omicron is a storm in a test tube and that the global recovery will not be derailed. The South African reports have reinforced that sentiment,” said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.
US equity and Asian assets responded positively to Omicron’s report this morning, curbing further decline in the global assets from Friday’s decline. However, there is no certainty on the virus given the sample size. More research is needed to better understand the characteristics of the Omicron.
US Fed is now expected to raise interest rates twice in 2022 if it will curtail escalating inflation rate and compel more people to go back to work. Investors are now waiting for Friday’s consumer price report.
Nigeria’s Oil Production Increase – Report
The most recent monthly survey conducted by Reuters has revealed that the Organization of Petroleum Exporting Countries (OPEC) continued to increase its oil production in November under the OPEC+ agreement, but the organization went on pumping less crude oil than its share of the monthly increase just as Nigeria started to see an increase in production.
The country’s oil production had been short until last month when Shell Petroleum Development Company of Nigeria (SPDC) resumed crude exports from the Bonny Light terminal after repairs to a pipeline that had started leaking.
Issues with operation have hindered the country’s crude oil production throughout the second half of the year, with disturbances at other terminals including Forcados, Brass River, Erha, and Qua Iboe.
In the last few months, Nigeria’s production has been below the budgetary benchmark, dropping to 1.37 million barrels per day in October. That rate is 261,000 bpd (barrels per day) below the country’s OPEC+ quota.
Under the OPEC+, the 10 members of the Organization who have been bound by the OPEC+ agreement should be increasing their joint production by 254,000 bpd every month out of the total OPEC+ monthly supply addition of 400,000 bpd.
In November, OPEC’s oil production went up by 220,000 bpd to 27.74 million bpd according to the survey conducted by Reuters. That rise once again fell short of the 254,000 rise which OPEC is expected to implement.
The Reuters survey affirms a trend which began a few months ago, that not all members of the Organization have the ability to produce to their full quotas.
Saudi Arabia, which is OPEC’s top producer and the default leader, saw the biggest increase in production in November. The increase was in line with the country’s target, and the same was seen in Iraq which is OPEC’s second-largest oil producer.
Nigerian production managed a recovery in November from constraints seen in October, but other African oil producers kept on struggling to produce to their targets.
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