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But feelers from the Organisation of Petroleum Exporting Countries, OPEC, have indicated that a fresh challenge to the nation’s new strength in the crude oil sector has started emerging.
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Vanguard’s findings across performance benchmarks showing signs of rebound in the sector includes rising rig count, recoveries in several oil terminals, opening up of new oil wells as well as stable export prices.
Average rig count, an index of measuring activities in the upstream sector, rose year-on-year, YoY by 62 per cent to 15 between June and October 2023, compared to nine recorded in the corresponding period of 2022.
A month-on-month breakdown of the data compiled by OPEC for five months period covering June – October 2023 put Nigeria’s rig count at 16, 14, 18, 15 and 13 in June, July, August, September and October 2023, respectively.
This shows a significant improvement compared to the 11, 11, 10, 7 and 8, recorded in June, July, August, September and October 2022, respectively.
The organization did not specify the driving factors, but checks by Vanguard pointed to the continued positive response of stakeholders, especially investors to Nigeria in the post-Petroleum Industry Act, PIA regime.
The PIA, a comprehensive legislation was signed into law by former President Muhammadu Buhari to bring about restructuring and repositioning of the oil and gas industry for new investments while enhancing transparency and accountability.
Oil production rises to 1.4m bpd
The nation’s oil output has recorded a huge rise by over 40 percent from the low base of below one million barrels per day (mbpd) last year to 1.45 mbpd in October 2023.
This means that when condensate, which Nigeria can produce between 300,000 bpd and 400,000 bpd is considered, the nation’s total output would be more than 1.6 million bpd.
Based on the data from Nigerian Upstream Petroleum Regulatory Commission (NUPRC), major oil terminals performed strongly in the third quarter of 2023, Q3:2023.
Specifically, Forcados terminal recorded a massive 6,028.5% YoY rise just as Bonny terminal recorded 1,875.7% rise, while Brass recorded 245.5% rise and Escravos rose by 24.0%).
All other terminals reported uptick in production for the first time in recent years.
Analysts’ insights
Giving their perspectives on the impact of the development in the oil sector, analysts at Afrinvest West Africa, a Lagos based investment house, stated: “Following expectations of a continued increase in oil production, we anticipate the oil sector would play a larger role in contributing to the overall real GDP for the full year of 2023.
“Also, ramping up oil productions to levels around 1.8mbpds would position Nigeria to capitalize on potential exchange rate revaluation gains from crude oil sales”.
Also commenting, economists at CardinalStone Capital, another Lagos based finance and investment firm, stated: “Looking ahead, we expect the oil sector to exit a recession in Q4’23, as we anticipate a sustained improvement in oil production, settling at 1.50mbpd”.
“Higher oil output translated to improved quarter-on-quarter, QoQ, GDP performance of 2.6%.”
Non-oil sector reverses trend
But while the oil sector is recording massive rebound, growth in non-sector has reversed.
Giving insight into this development, analysts at CardinalStone stated: “The weaker growth in the non-oil sector may have stemmed from the dual actions of the CBN. First, the CBN pulled back from the direct development finance interventions orchestrated by the former CBN leadership.
“Given that a significant portion of CBN’s development finance is concentrated in the Agriculture sector, the stoppage, coupled with pre-existing issues like insecurity, might have constrained the sector’s outturn, whose growth (+1.30% YoY) recorded the lowest Q3 performance on record.
“The second action of the CBN was the sustained hawkish rendition, which resulted in material increases in the domestic interest rate.
“This elevated borrowing rate might have dampened sentiment in the Manufacturing sector, which recorded a marginal increase of 0.48% YoY (vs. 2.20% YoY in Q2’23).
“In addition, the lingering currency pressures further stoked the weak outturn in the manufacturing sector, as we note that 60.00% of companies on the NGX 30 have significant FX needs.
The OPEC challenge
Meanwhile, the OPEC and non-OPEC Ministerial Meeting, ONOMM, has forecasted Nigeria’s oil output at 1.5 million bpd in 2024, indicating that a production cut back would put Nigeria’s quota around that level, down from 1.8mbpd.
This is coming at time Nigeria has based her economic recovery and fiscal plan 2024 – 2026 on a high output level of between 1.7mbpd and the current 1.8mbpd existing OPEC quota.
At its 36th ONOMM held via videoconference monitored by Vanguard, Thursday, ONOMM, stated: “In accordance with the decision of the 35th OPEC and non-OPEC Ministerial Meeting, the completion of the assessment by the three independent sources (IHS, Wood Mackenzie and Rystad Energy) for production level that can be achieved in 2024 by Angola, Congo and Nigeria as follows: Angola at 1,110 t/bd, Congo at 277 t/bd and Nigeria at 1,500 t/bd.”
Experts comment, make case for more investment
With the recent shifts in Nigeria’s economy bringing the oil sector back to dominance, industry experts and economists are recommending best positioning for the country to maximize the value to create inclusive growth.
The Founder and Executive Chairman of AA Holdings, Mr. Austin Avuru, has called for massive investment to meet set targets in the future.
He regretted that investment into Nigeria’s oil and gas industry dropped by 77.3 per cent to $5 billion in 2021, from $22 billion in 2014, due mainly to increased divestment by the International Oil Companies, IoCs.
He said: “The IoCs are leaving and will continue to divest. The IoCs are not hiring and investing as much as they used to invest in the oil and gas industry. It is only a few Independents that are still investing.
“The nation’s oil and gas reserves have been standing at more than 30 billion barrels and 203 trillion cubic feet respectively for too long. We need to increase investment to hit the 40 billion barrels reserves and 600 trillion standard cubic feet of gas in the coming years. That would require the deployment of many rigs.
“We need to increase funding. Significant infrastructure is required. We need to invest in infrastructure not only in the upstream sector but also in the midstream and downstream sectors.”
Reacting on the implications of the recovery of oil sector, Prof Uche Uwaleke, President, Association of Capital Market Academics of Nigeria, ACMAN, said: “Largely on account of improvement in oil production from 1.22mbpd in Q2 2023 to 1.45mbpd in Q3. At current favourable oil price level, a further increase in oil production to meet OPEC quota of 1.74mbpd will significantly move the needle into the positive territory thereby boosting overall GDP in the process
“Oil sector improved chiefly on account of increase in crude oil production during the quarter (from 1.22mbpd to 1.45mbpd.
“Industry and agriculture sectors appeared hugely impacted by economic headwinds during the quarter.
“The sudden removal of fuel subsidy in May 2023 could be blamed for the performance of the Transportation sector still in the negative territory (-35.85%)
“The Agriculture sector (comprising 4 activities, though dominated by crop production) recorded a declining performance over Q2. (1.30% still far from its pre COVID’19 levels).
“In my view, this identified growth pattern, weighted in favour of the services sector, is not healthy for a developing economy such as ours. Little wonder, economic growth does not appear inclusive reflecting in rising unemployment and poverty levels (new NBS methodology attempts to mask this)
“It’s time we reset this faulty economic structure, leveraging technology, in favour of the productive sectors: Industry and Agriculture.
“Indeed, structural change is strongly recommended (by UNCTAD) as one of the ingredients of building productive capacities.”
In his own reaction, Tajudeen Olayinka, CEO, Wyoming Capital and Partners, said: “Even though it is still a far cry from what is considered to be a transformative number for the economy, it should still be considered a good development. Any effort to improve dollar liquidity in the economy is much appreciated at this time.
“The sad experience of oil theft and banditry we suffered under former President Muhammadu Buhari must not be allowed to continue. It was as if we had no government.”
