Nigeria incurred a staggering loss of over N8.7 trillion, calculated at an exchange rate of N758 per US dollar, between January and August. This loss stemmed from Nigeria’s inability to fulfill its oil production quota assigned by the Organisation of Petroleum Exporting Countries (OPEC), as reported by Daily Trust on Sunday.
This predicament unfolds amidst a worsening debt crisis, prompting experts to urge the federal government to urgently boost revenue by addressing oil theft.
Nigeria, the largest crude oil producer in Africa, fell short by 144 million barrels of crude oil production during this period, failing to meet OPEC’s allocation. OPEC, a coalition of 13 oil-producing nations, allocates production quotas to ensure global oil market stability and price control, with Nigeria’s share at 1.8 million barrels per day during this timeframe.
Analyzing data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and OPEC’s monthly statistics, it is evident that Nigeria was allocated 1.8 million barrels per day, totaling 432 million barrels for the eight-month span. However, Nigeria only managed to produce 288 million barrels, amounting to N17.5 trillion in earnings, based on an average oil price of $80 per barrel.
Oil prices oscillated from $82 per barrel in January to $70 in March, currently resting at $92 per barrel, resulting in an average calculation of $80 per barrel.
This production shortfall translates to an average monthly output of 1.2 million barrels per day.
The underlying reasons for Nigeria’s failure to meet its OPEC production quota are rooted in persistent challenges such as oil theft and pipeline vandalism in the Niger Delta region. While Nigeria briefly increased its production to 1.3 million barrels per day in February, it has consistently fallen short of its obligations for over two years.
Former Minister of State for Petroleum Resources, Timipre Sylva, and the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, have repeatedly revised the target dates for Nigeria to meet its OPEC production quota. Despite these efforts, the country continues to grapple with oil theft, with the National Security Adviser, Nuhu Ribadu, confirming daily losses of 400,000 barrels to both local and international thieves.
The Nigerian National Petroleum Corporation (NNPC) has identified and dismantled numerous illegal refineries and pipeline connections in the Niger Delta region, underscoring the severity of the issue.
Additionally, the reduction in Nigeria’s oil production quota by OPEC, in alignment with its agreements, poses a threat to the country’s government revenue, budget planning, and overall economic stability.
While OPEC agreements specify production cuts for each member, enforcement mechanisms are limited, relying largely on trust. Consequently, countries that exceed their agreed quotas often go unpunished.
The Association of Capital Market Academics of Nigeria (ACMAN) has estimated that, at a conservative crude oil price of $85 per barrel, Nigeria loses over $1 billion in revenue each month. ACMAN and other experts emphasize the urgent need to combat crude oil theft, which not only impacts revenue but also hampers the implementation of key policy measures, including a new minimum wage and food security programs.
It’s important to note that oil theft is not limited to a few individuals but involves a complex network of actors, including local and foreign collaborators, due to the scale of the operation.