According to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s oil production has fallen below the target set by OPEC in the first five months of 2023. The country produced only 56 percent of its expected output during this period, resulting in a deficit of 80 million barrels of crude oil. This underproduction translates to a loss of approximately $5.6 billion in revenue based on a conservative oil price of $70 per barrel.
The decline in production has been a recurring issue since 2020 and has negatively impacted Nigeria, which heavily relies on oil exports for foreign exchange earnings. Recently, OPEC reduced Nigeria’s production baseline for 2024 to 1. 38 million barrels per day, reflecting the country’s consistent failure to meet its quota. This decision is concerning for Nigeria’s economy, and the country’s budgeted oil production of 1. 69 million barrels per day for this year has been consistently lagging behind.
From January to May 2023, Nigeria’s monthly oil output fell short of expectations, with April being the most affected month due to low drilling volumes. The shutdown of oil platforms and the declaration of force majeure by Exxon Mobil at the Qua Iboe asset contributed to the reduced production in April. Despite some growth in production at specific terminals, Nigeria’s overall crude oil output for May was still far from the allocated quota set by OPEC.
Nigeria faces various challenges, including oil theft, pipeline vandalism, and decreased investment in the sector, which have hindered oil production. However, the Group Chief Executive Officer of NNPC, Mele Kyari, remains optimistic, stating that the country’s crude oil production will reach 1.8 million barrels per day by July 2023 and 2 million barrels per day by December 2023.
Marketnews Thoughts: Nigeria’s persistent underproduction of oil and failure to meet its OPEC quota is a significant concern for the country’s economy. The loss of revenue due to underproduction hampers development and poses challenges for meeting budgetary requirements. Addressing issues such as oil theft and pipeline vandalism, and attracting investment in the oil sector are crucial steps towards improving production levels. However, it remains to be seen whether Nigeria can achieve its ambitious production targets within the specified time frame.