Nigeria’s Crude Oil Sales Increase by 46.41% Pushing Total Export to N26.79tn in 2022
Nigeria’s total exports rose by 41.72% from N18.91tn in 2021 to N26.79tn in 2022, thanks to a significant increase in crude oil sales, which accounted for 78.74% of the total export, according to data from the National Bureau of Statistics (NBS).
However, despite the boost in crude oil sales, Nigeria failed to benefit from the oil price boom due to fuel subsidies and reduced oil production.
The average price of crude oil increased by over 150% from 2020 to 2022, but Nigeria’s fiscal space shrank, and its macroeconomic performance weakened over the same period, with the fiscal deficit estimated to have increased to 5.7% of GDP from 5.4% in 2020 before the boom.
The World Bank attributed Nigeria’s failure to benefit from the oil price boom to fuel subsidies, which amounted to forgone fiscal revenues of 2.5-2.7% of GDP in 2022, coupled with high production costs, theft and insecurity, joint-venture cash-call arrears, and inadequate investment that caused Nigeria’s crude oil output to fall consistently below its Organisation of the Petroleum Exporting Countries quota since June 2020.
The International Monetary Fund also noted that higher oil prices are yet to deliver tangible benefits to Nigeria amid a contraction of oil production and costly fuel subsidies.
The situation is worrisome, as Nigeria’s oil production slumped by 28 million barrels from January to July 2022, threatening the Federal Government’s N9.37tn oil and gas revenue target for 2022.
The government projected that it would earn N3.12tn from January to April, but only generated N1.23tn, indicating a significant revenue shortfall.
The continued reduction in oil production and the country’s inability to meet its revenue target could lead to bankruptcy, according to Dr Sam Nzekwe, a former President of the Association of National Accountants of Nigeria.
Oil Prices Remain Steady Ahead of U.S. Inflation Data
Oil prices were holding steady on Friday as investors awaited the release of key U.S. inflation data that could provide clues on future interest rate moves.
Brent crude oil, the international benchmark for Nigerian oil, which has risen by almost 6% this week was up by 0.2% at $79.45 a barrel, while West Texas Intermediate crude oil rose by 0.7% to $74.89.
Concerns about a full-blown global banking crisis have abated after banks in the U.S. and Europe were rescued, and oil prices have broadly recouped losses that followed the largest bank failures since the 2008 financial crisis.
Oil prices have also been supported by the shutdown or reduction of output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq following a halt to the northern export pipeline.
Data has shown that U.S. crude oil stockpiles have fallen to a two-year low while China’s manufacturing activity rose in March.
Investors are now waiting for the U.S. personal consumption expenditures (PCE) figures due later today to decipher market direction. Economists polled by Reuters expect the core PCE index to ease to 0.4% in February from January and stay broadly steady on an annual basis at 4.7%.
On Thursday, the U.S. House of Representatives passed a bill intended to boost U.S. oil and gas production while scaling back climate initiatives.
Sources have suggested that with oil prices recovering from recent lows, the Organization of the Petroleum Exporting Countries and allies led by Russia are likely to stick to their existing deal to cut oil output at a meeting on Monday.
Investors will be closely monitoring the outcome of this meeting and any further developments that may impact oil prices.
Oil Prices Rise on Unexpected U.S. Crude Stockpile Drop and Halt in Iraqi Exports
Oil prices increased on Thursday due to a surprise decline in U.S. crude stockpiles and a stoppage in exports from the Kurdistan region of Iraq that outweighed a smaller-than-expected cut in Russian supplies.
Brent crude oil, against which Nigerian oil is priced, climbed 0.51% to $78.68 a barrel while West Texas Intermediate crude oil rose 0.71% to $73.49 a barrel.
The Energy Information Administration revealed on Wednesday that U.S. crude oil stockpiles had dropped unexpectedly in the week ended March 24 to a two-year low.
Analysts had predicted a 100,000-barrel increase, but the inventory dropped by 7.5 million barrels.
Also, exports from Iraq’s northern region remained suspended due to oilfield producers shutting down or decreasing production following a stoppage to the northern export pipeline.
The Kurdistan-Iraq premium in oil prices, however, may vanish sooner than anticipated, as analysts from Citi predicted that pipeline flows could grow by around 200,000 barrels per day due to changes in Iraq’s domestic politics, which could lead to a durable political settlement.
Although the lower-than-expected cut to Russian crude oil production caused bearish sentiment, it was offset by the unexpected U.S. crude stockpile drop and halt in Iraqi exports.
The 300,000 barrels per day production decline in the first three weeks of March represented around 5% of Russian output, compared to targeted cuts of 500,000 barrels per day.
UBS stated that they anticipate rising Chinese crude imports and lower Russian production to boost prices over the coming quarters, despite the potential for near-term volatility in oil prices.
Meanwhile, markets will keep an eye on U.S. spending and inflation data scheduled for Friday and their impact on the value of the U.S. dollar.
NNPCL Intensifies Oil Exploration, Targets 50 Billion Barrels Reserves
The Nigerian National Petroleum Company Limited, NNPCL has intensified efforts to boost the nation’s crude oil reserves to 50 billion barrels.
Investors King gathered that the NNPCL has drawn out plans to move from the 37 billion barrels of oil reserves to 50 billion barrels through its recent projects.
This is as the national oil company launched officially the spud-in (drilling) for crude oil in the Ebenyi-A Well in Obi Local Government Area of Nasarawa State.
Speaking at the event on Tuesday, the Group Chief Executive Officer, NNPCL, Mele Kyari stated that the new drilling rig at the Ebenyi-A Well site will increase Nigeria’s oil output to about three million barrels per day.
In November 2022, the national oil company inaugurated the Kolmani oil well located between Bauchi and Gombe states to also improve the nation’s oil reserves, Investors King recalls.
Kyari noted that the Ebenyi-A Well will greatly aid the NNPCL in attaining its 50 million barrels oil reserves target.
He spoke on the collaboration between NNPC Limited and Nigeria Upstream Petroleum Regulatory Commission (NURPC) for better oil exploration activities through the use of technology for the nation’s frontier basins which cuts across the Chad Basin, Upper and Lower Benue troughs, Bida Basin, the Sokoto Basin, Dahomey, Anambra platform, Calabar embankment and the Ultra deep water Niger Delta.
Kyari disclosed that the directive of President Muhammadu Buhari on the mobilisation for re-entry into the Chad Basin had been enacted and the entry had begun.
Buhari, who addressed the attendees virtually said the Ebenyi-A Well of the Middle Benue Trough will further aid the exploration of crude and gas in the frontier basins across Nigeria.
He commended the efforts of the NNPCL and support of the government and people of Nasarawa State towards the success of the oil exploration
His words, “Today’s occasion marks the official commencement of exploration drilling activities in the Middle Benue Trough. This is consistent with the commercial discoveries of hydrocarbons in the Kolmani Area of the Upper Benue Trough.
“I am pleased to note that activities are currently ongoing to develop the Kolmani petroleum discoveries to commercial production to add to the nation’s considerable hydrocarbon assets.
“The consequent positive outcomes of these drilling campaigns will lead to greater prosperity for our people and especially enhance overall energy security for our country.”
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