Nigeria Crude Oil Earnings Drop by N824.66 Billion in 2024 Despite Revenue Growth
Nigeria’s crude oil and gas sector experienced a significant decline in profitability in 2024, with gross earnings falling by N824.66 billion. According to the Budget Implementation Report for Q4 2024 from the Budget Office of the Federation, gross profit dropped to N1.08 trillion from N1.90 trillion in 2023—a 43.32% year-on-year decline. This shortfall also missed the government’s target of N1.46 trillion, signaling that higher oil revenues did not translate into stronger profits.
The decline is particularly stark when viewed as a share of total oil revenue. While total oil and gas receipts rose sharply to N15.07 trillion in 2024 from N8.36 trillion in 2023, gross profit represented only 7.2% of the total, down from 22.8% the previous year. This suggests that although Nigeria is collecting more revenue from petroleum sales, operational costs, legacy obligations, and production-sharing agreements are eroding the sector’s underlying profitability.
Quarterly performance further highlights the pressure on margins. Q2 2024 recorded the lowest gross profit at N161.49 billion, creating a deficit that the following quarters—Q3 at N216.58 billion and Q4 at N335.69 billion—could not fully recover. Despite modest recoveries in the second half of the year, all quarters fell short of the implied budget benchmark of N366.09 billion, leaving the annual profit well below expectations.
Yet, revenue streams beyond gross profit painted a more optimistic picture. Petroleum Profit Tax and gas income more than doubled to N6.00 trillion, oil and gas royalties surged to N6.99 trillion, and exchange gains from a weaker naira spiked to N4.24 trillion. Gas flaring penalties and incidental oil revenues also posted triple-digit growth. These inflows drove net oil revenue to the federation up to N12.95 trillion, highlighting that the government’s revenue mobilization has improved, even as profitability remains squeezed.
Experts suggest that the disconnect between revenue growth and profitability is driven by higher operational costs, ongoing joint-venture obligations, and fiscal structures in the upstream sector. While headline figures show stronger oil receipts and increased FAAC allocations, underlying efficiency challenges and cost pressures mean that Nigeria is capturing a smaller slice of the sector’s real profits, posing a challenge for long-term fiscal sustainability.
source: nairametrics