May 13, 2024/CSL Research
The latest report from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s average crude oil production increased slightly by 4.14% in April 2024, reaching 1.28 million barrels per day (excluding condensates), up from 1.23 million bpd in March. This marks the first uptick after two consecutive months of decline in February and March, following a peak of 1.43 million bpd in January 2024. Production at eight major terminals remained at March levels in April, but notable growth was observed at the Bonga and Qua Iboe terminals, which experienced increases of 20% and 6%, respectively. Issues with the Trans Niger Pipeline and maintenance activities by certain oil companies, which had impacted production in March, have since been resolved. Consequently, we anticipate a steady 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. Consequently, the nation has suffered substantial revenue losses, and the low production levels have also resulted in a significant decline in FX supply since crude oil sales are 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/USo$ on 8 March 2024 at the Investors and Exporters (I&E) window. However, there was a recent improvement in FX liquidity following implementing 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 more sustainably in the FX market. In our assessment, the sustainability of the FX rate improvement driven by CBN policies depends partly on increased crude oil production volumes. Thus, addressing every bottleneck affecting low production should be a top priority for all stakeholders.
