The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) released a report in April 2023 that states that the country’s average crude oil output climbed marginally from 1.23 million barrels per day (bpd) in March to 1.28 million barrels per day (bpd) in April 2023.
After two months of drop in February and March, and a peak of 1.43 million bpd in January 2024, this is the first rise. In April, production at eight major terminals stayed at March levels; however, the Bonga and Qua Iboe terminals showed significant growth, with increases of 20% and 6%, respectively.
Production had been affected in March by problems with the Trans Niger Pipeline and several oil firms’ maintenance efforts, but those issues have since been fixed. As such, we expect a consistent increase in production volumes in the coming months.
Also noteworthy, NNPC recently disclosed that its upstream subsidiary NNPC Exploration and Production Limited (NNPC E&P Ltd) and Natural Oilfield Services Ltd (NOSL), a subsidiary of Sterling Oil Exploration & Energy Production Company Ltd (SEEPCO), have successfully commenced oil production at Oil Mining Lease (OML) 13 in Akwa Ibom State.
Nigeria’s oil output has remained subdued, reaching a low of 0.94mbpd in September 2022. Several factors contribute to these low production levels, including rampant crude oil theft in the Niger Delta, aged oil fields, inadequate maintenance of crude oil terminals, frequent shutdowns, and a decline in investments in the upstream oil and gas sector.
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Consequently, the nation has suffered substantial revenue losses and the low production levels have also resulted in significant decline in FX supply, since crude oil sale is a major source of FX for the country. Despite efforts by FG to bolster pipeline surveillance and crack down on oil theft, progress has been sluggish and inconsistent.
Nigeria has been grappling with substantial foreign exchange (FX) shortages recently, leading to the Naira plummeting to an all-time low of N1,627.4/US on 8 March 2024 at the Investors and Exporters (I&E) window.
However, there was a recent improvement in FX liquidity following the implementation of several policies by the Central Bank of Nigeria (CBN), resulting in the Naira appreciating to N1072.5/US$ last month.
However, the gains are beginning to retreat, with the Naira closing at N1466.31 per US dollar at the I&E window last Friday. Given that crude oil receipts serve as a major source of FX for the country, a significant increase in production could boost FX supply and help alleviate liquidity issues in a more sustainable manner in the FX market.
“In our assessment, the sustainability of the FX rate improvement driven by CBN policies depends in part on increased crude oil production volumes”, CSL Stockbrokers said in its market update. Analysts said addressing every bottleneck affecting low production should be a top priority for all stakeholders.
