October 16, 2023/CSL Research

According to the latest monthly report from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s average oil production hit a 20-month high in September reaching 1.57mbpd. The report indicated that crude oil output (including condensate) rose by 11.1% from 1.43mbpd in August and surged by 25.6% from the year-low of 1.23mbpd in April. These figures imply that the country pumped a total of 47.2million barrel (including condensates) in September, the highest on record since January 2022 (51.9mb). 

Oil output from Nigeria has been low in recent years and the country in recent time recorded its lowest oil production volume of 0.94mbpd in September 2022. The country’s low production has been attributed to massive crude oil theft in Nigeria’s oil rich Niger Delta, crude oil terminal maintenance, shutdowns, and reduced investments in the upstream oil and gas sector. The situation also led to significant revenue losses for the country, international oil companies operating in Nigeria, as well as indigenous operators in the industry. The Federal Government has sustained efforts at reinforcing pipeline surveillance and clampdown on oil theft, but results appear slow and inconsistent. Industry data showed crude oil production output rallied for 7 months from September 2022, but production began to decline again in February 2023. 

Nigeria has struggled with significant FX shortages causing the naira to fall to a record low against the dollar. The naira has continued to depreciate due to an acute shortage of supply amidst a growing demand and the country’s low oil production is a major reason behind the shortage of foreign exchange. Crude oil receipts are a major source of FX for the country and a significant increase in production will increase FX supply and ameliorate the liquidity issues in the FX market