Nigeria’s Crude Oil Production Costs Spark Concerns as Expenditures Soar to N18tn Annually
Nigeria is facing growing concerns over the high cost of crude oil production, with industry experts warning that the country spends approximately N18 trillion annually on crude oil extraction. Data from sources such as the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) shows that the cost of producing a barrel of crude oil in Nigeria ranges from $25 to $40, with the country’s average daily production standing at 1.4 million barrels. This means the country spends around $35 million daily on crude production, leading to substantial financial implications.
In comparison with other oil-producing countries like Saudi Arabia, where production costs are as low as $10 per barrel, Nigeria’s costs are among the highest globally. In 2024, the Nigerian government spent N29 trillion on crude production, further straining the nation’s revenues. The high production costs, exacerbated by factors like insecurity and outdated infrastructure, have been identified as major barriers to improving profitability and competitiveness in the global oil market.
The Nigerian government has acknowledged the challenges posed by these high production costs. Mele Kyari, CEO of the Nigerian National Petroleum Corporation (NNPC), highlighted that security issues and logistical difficulties add significant premiums to the cost of production. As part of its efforts to address these concerns, the NUPRC has set a target to reduce production costs to $20 per barrel by 2025, through modernization and security improvements aimed at increasing efficiency.
Experts have emphasized that reducing the cost of crude production is crucial for Nigeria’s economic stability. High production costs not only limit the country’s competitiveness in the global market but also reduce the available revenue for the government to fund national development programs. Analysts urge the government to conduct a comprehensive review of the true cost of production and explore measures to address security and infrastructure issues, which have significantly impacted the sector’s profitability.
Source: PUNCH