Nigeria’s Crude Oil: This data is damning

Over the years, Oil has been the heartbeat of the Nigerian economy. However, years of mismanagement and low investment in infrastructure have bedeviled the sector.

Here is a quick deep dive into the statistical anomalies and warning signs that policymakers need to examine for introspection and immediate solution.

1. According to OPEC, Nigeria’s oil output was 1.39 million barrels per day (bpd) in January 2022 – 260,000 barrels below its production quota of 1.68 million barrels per day in January. The average price of Brent Oil in January was $86.51.

  • Implication: Daily realized loss – $25 million
  • Monthly realized loss – $752 million – (N309 billion – using N411 to a $1).

2. According to OPEC, Nigeria’s oil output was 1.26 million barrels per day (bpd) in February 2022 – 440,000 barrels below its production quota of 1.70 million barrels per day in February. The average price of Brent Oil in January was $97.13.

  • Implication: Daily realized losses – $42.7 million per day.
  • Monthly realized loss – $1.3 billion – (N526.9 billion – using N411 to $1).

3. According to OPEC, Nigeria’s oil output was 1.23 million barrels per day (bpd) in March 2022 – 490,000 barrels below its production quota of 1.72 million barrels per day in March. The average price of Brent Oil in January was $117.25.

  • Implication: Daily realized loss – $57.45 million.
  • Monthly realized loss – $1.72 billion – (N708.39 billion – using N411 to $1).

4. According to the report from Nigeria’s auditor-general reviewed by lawmakers – 107,239,436.00 barrels of crude lifted for domestic consumption were unaccounted for by NNPC in 2019. According to Statista, the average price of Brent oil in 2019 was $64.3.

  • Implication: That is $6.8 billion worth of crude oil unaccounted for. The naira equivalent is N2.2 trillion naira – using N306 to $1 (2019 exchange rate). Almost 25 percent of Nigeria’s national budget in 2019 (N8.83 trillion)

5. According to the Accountant-General of the Federation, for that period (2019), only N608.7 billion ($1.4bn) was received for remittance from NNPC different from the N1.27 trillion ($3billion) NNPC claimed it handed over .

6. According to Nigeria’s extractive sector watchdog, National Extractive Industries Transparency Initiative (NEITI), nearly 100 oil and gas companies operating in Nigeria owed the government N2.6 trillion ($6.2billion) in taxes, royalty, and concessions on rentals.

7. In 2018, the Kaduna Refinery did not record any revenue, however it recorded a loss of N64.3 billion.

8. If you add the N1.6 trillion losses incurred by the Porth Harcourt, Kaduna and Warri refineries lost from 2014 to 2019 to the combined costs of fuel subsidy payments spent in the 4th quarter of 2021 (N713 billion), you would be able to fund the Presidential Infrastructure Development Fund of N2.3 trillion budgeted to spend on the Lagos-Ibadan expressway, Second Niger Bridge, Abuja-Kaduna-Zaria-Kano road and Mambilla hydropower project without borrowing.

9. In 2021, the cost of petroleum subsidies was N1. 4 trillion. The Federal government’s total oil revenue was N542 billion between January and December 2021 – thousands of its N2.5 trillion projection. The numbers for 2022 will be grimmer given rising oil prices.

10. 80% of some oil producers’ production does not make it to the terminals because of oil theft. According to stakeholders, Only 5% of all the crude oil that was pumped through the pipeline between October 2021 and February 2022 was received by producers.

11. According to a Tony Elumelu tweet, the Bonny Terminal that should receive over 200k barrels of crude oil daily, receives less than 3,000 barrels, which led the operator Shell to declare force majeure which has taken a toll on their businesses. With current prices, the missing barrels are worth over $4 billion a year.

12. A report published by the Central Bank of Nigeria, CBN, shows that oil revenue for ten months to October 2021 (10M-21) stood at N4.03 trillion, representing very marginal increase of 0.2 per cent from the N4.02 trillion recorded in the corresponding period of 2020 (10M-2020) despite oil prices increasing by 49 per cent during the period.

13. Nigeria has 37 billion barrels worth of oil reserves. The United States has 36 billion barrels worth of oil reserves. But In terms of production output: Nigeria produces 1.23 million barrels a day according to the latest OPEC report. The United States produces 11.6 million barrels a day.

In Africa, Nigeria lays claim to Africa’s top oil producer but on a global scale, the phrase “empty barrels make the loudest noise” becomes more apt.

14. The Excess Crude Account (ECA) is designed to save revenues that were generated from the sale of oil for the rainy days.

Four administrations withdrew $107 billion between 2004 and April 2018 from this account and there has not been any serious impact on the reduction of the rate of unemployment in the country, which increased from 13.4 per cent in 2004 to 23.10 per cent in 2018.

15. The last time Nigeria produced up to 2.5 million barrels a day was in 2010, (12 years ago) since then production has been on a slippery slope.

16. In 2012, the Government took a loan of $1.6 billion to carry out Turnaround Maintenance on Nigeria’s refineries.

In 2021, the Federal Government approved $1.5 billion to rehabilitate the Port Harcourt oil refinery.

Add the last 5 months’ subsidy payments and you would have the new refinery Egypt just built for $4 billion that would produce 4.7 million tonnes of refined products per year when fully operational.

17. In June 2021, NNPC disclosed that daily consumption of fuel had increased from 60 million liters to 103 million litres. In February 2021, the daily consumption was about 50 million litres. Knowing the premium gained by smuggling and round-tripping fuel to neighboring countries that sell fuel 2-3 times higher, can we see the nexus between inflated consumption numbers and increased border smuggling the EFCC cried about last year?

In worrying news – India is the largest buyer of Nigeria’s oil, but Russia has offered to sell its oil at a discounted price ($35) because of international sanctions, Nigeria’s crude oil has struggled to find buyers with India buying more of Russia’s Ural in March 2022 than they ever purchased in the whole of 2021. Nigeria, which sells Bonny light at $105 has however turned to Europe but still no buyers as the European market is well supplied.

Warning bells?

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