November 13, 2023/CSL Research

According to the latest monthly report from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s average oil production (including condensates) marginally declined in October to 1.56mbpd. The report indicated that crude oil output (including condensates) declined by 0.7% from 1.57mbpd in September. The October production number is however up by 24.8% from the year low of 1.23mbpd in April. This implies that the country pumped a total of 48.4million barrels (including condensates) in the 31 days of October. September production number remains the highest this year. 

Oil output from Nigeria has been low in recent years and the country recorded its lowest oil production volume of 1.14mbpd in September 2022. The country’s low production has been attributed to massive crude oil theft in Nigeria’s oil rich Niger Delta, ageing oil fields, poor crude oil terminal maintenance, shutdowns, and reduced investments in the upstream oil and gas sector. The situation has led to significant revenue losses for the country. 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 6 months from a record low in September 2022, but production declined again in April 2023 and picked up again in May 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. Again, the inability of the NNPC to supply crude oil to five modular refineries and the 650,000 bpd Dangote refinery has been reported to be delaying the commencement of production of refined petroleum products in those refineries.