Nigeria’s oil revenue has taken a sharp hit, with the Central Bank of Nigeria (CBN) citing aging infrastructure and operational challenges as the main culprits. According to the CBN’s economic report for the third quarter of 2024, the nation’s oil earnings dropped by 24.72%, plunging to N1.30 trillion compared to the previous quarter.
This decline was primarily caused by a reduction in revenue from petroleum profit taxes and royalties. The report further revealed that the revenue fell short of the quarterly target by a staggering 75.39%. Frequent production shutdowns caused by deteriorating pipelines and outdated installations significantly contributed to the shortfall.
Infrastructure and Operational Challenges
Despite a modest increase in crude oil production—rising to 1.33 million barrels per day (mbpd) from 1.27 mbpd in the previous quarter—persistent challenges like theft, vandalism, and infrastructure deficits undermined progress. The aging pipelines not only hindered operational efficiency but also affected Nigeria’s ability to meet its OPEC production quota, a critical benchmark for the country.
Global Market Impact
The global oil market further compounded Nigeria’s woes. The average price of Nigeria’s Bonny Light crude dropped by 5.45% to $82.23 per barrel, reflecting reduced demand in international markets. Similar price declines were recorded for other crude benchmarks, including Brent and the OPEC Reference Basket.
Economic and Fiscal Implications
While the oil sector struggled, Nigeria’s economy showed some resilience, growing by 3.46% in the third quarter, up from 3.19% in the previous quarter. This growth was driven by the non-oil sector, which contributed significantly to the nation’s GDP. However, the oil sector’s year-on-year growth slowed to 5.17%, down from 10.15% in the second quarter.
On the fiscal side, federally collected revenue fell 23.71% short of budget expectations, despite a 7.48% quarter-on-quarter increase. The fiscal deficit widened by 43.88% compared to the quarterly target, highlighting ongoing financial pressures.
Looking Ahead
The CBN’s report underscores the urgent need for Nigeria to address its infrastructure challenges if it hopes to achieve its 2024 oil production target of 2 million barrels per day. Until then, the nation’s oil revenue—and by extension, its economy—will remain under pressure.
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