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.