Nigeria must increase production and exports of oil and gas to meet its financial demands. -Economist

Nigerian Economist, Dr Biodun Adedipe, has said that Nigeria needs to produce and export more hydrocarbons (oil and gas) in order to meet its fiscal needs. 

He stated this during the 2023 First Bank Nigeria (FBN) Economic Outlook webinar which was held recently.  

According to Dr Adedipe, crude oil prices have trended upward since 2014 and actual prices exceeded budget assumptions, except in 2015 and 2020. However, Nigeria has not been able to take advantage of the favourable price trend because of weak production and export. He pointed out that 2021 and 2022 were particularly bad. 

Crude oil production in 2022 was abysmal: In 2022, Nairametrics reported that Nigeria went from producing 1,083,899 barrels per day in July 2022 to 937,766 barrels per day in September 2022. The fall in production was attributed to crude oil theft in the Niger Delta region of the country. 

However, by October 2022, the Federal Government in collaboration with the Nigerian National Petroleum Company (NNPC) Limited and security agencies had shut down the operations of 395 illegal refineries, including the discovery of an illegal connection of four kilometres en route the sea running from the major Forcados line, which had been around for 9 years.  

During Dr Adedipe’s presentation at the FBN webinar, he stated that Nigeria has not been able to generate enough revenue to meet its needs due to oil production challenges. He said: 

  • “The resulting fiscal trouble is manifest in the inability to generate enough revenue to meet maturing obligations and a significant portion of revenue going into debt servicing and repayment obligations. It is obvious then where the solution to Nigeria’s fiscal woes lies: Produce/export more hydrocarbons (until non-oil revenue becomes strong enough to sustain fiscal needs). Courageously address the cost of governance.” 

Slower economic growth in 2023: During his presentation, Dr Adedipe quoted the latest Global Economic Prospects report from the World Bank, stating that in 2023, there will be a sharp, long-lasting slowdown, with global growth declining to 1.7% in virtually all regions of the world.  

  • “By the end of 2024, gross domestic product (GDP) levels in emerging-market and developing economies (EMDEs) will be about 6% below the level expected on the eve of the pandemic. Median income levels, moreover, are being eroded significantly—by inflation, currency depreciation and under-investment in people and the private sector.” 

The World Bank forecast can be linked to local challenges facing the country, including rising production costs, underperforming oil and gas sector, insecurity, floods, and policy uncertainty.