September 20, 2023/CSL Research

According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s oil production (with condensates) increased by 8.46% MoM to 1.41 mbpd compared to 1.30mbpd recorded in July 2023. Without condensates, production grew to 1.18mbpd compared with 1.089mbpd in July. The perennial issues of pipeline vandalism, theft, and terminal shut-downs have continued to constitute clogs.

Though the government has been making efforts to clamp down on theft, production numbers in the first eight months of the year have not been too impressive. That said, the devaluation of the currency at the I&E window and the FX unification bodes well for oil receipts and as such oil revenue will likely exceed budgeted numbers this year. Again, expensive subsidy payments also engulfed over 75% of gross oil revenue in 2022, limiting the amount paid to the federation account. With the subsidy eliminated, the country’s revenue position should improve considerably.

The oil sector, which has been in a three-year recession, showed some improvement in Q1 2023 but production numbers declined in Q2 2023. We believe production numbers will likely perform below our initial expectations at the start of the year. Our expectation was based on the increased pipeline surveillance and the clampdown on oil theft by the government. However, production numbers have not recovered as fast as expected and oil prices have softened. We reiterate our projection of average crude oil production (including condensates) of 1.50mbpd in H2 compared with 1.45mbpd in H1, implying average production of 1.48mbpd for 2023 compared with our earlier forecast of 1.6mbpd for 2023′

That said, the devaluation of the currency at the I&E window and the FX unification bodes well for oil receipts, and as such oil revenue will likely exceed budgeted numbers this year. Again, expensive subsidy payments also engulfed over 75% of gross oil revenue in 2022, limiting the amount paid to the federation account. With the subsidy eliminated, the country’s revenue position should improve considerably. However, considering a large debt position of N87.4trn, there is a need to ensure maximum production and explore all avenues to improve revenue.

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