By Louis Achi
The N21.8 trillion budgeted for 2023 has come under severe threat as Nigeria suffered a 470,000 barrels per day, BPD, deficit in crude oil output, in August 2023.
This shortfall translates to 29 per cent fall from the budget benchmark of 1.69 bpd.
With the current global market price of $92 per barrel, the 470,000 bpd shortfall amounts to a loss of $43.2 million daily or N32 billion at the Central Bank of Nigeria’s exchange rate of N742.10/$.
The budget was pegged on 1.69 million bpd and $75 per barrel and at the exchange rate of N437.57/$, the government expects to generate N2.29 trillion from the oil sector in 2023.
In its September Monthly Oil Market Report, MOMR, the Organisation of Petroleum Exporting Countries, OPEC, disclosed that Nigeria produced 1.2 million bpd, excluding condensate, with output of 233,531 bpd meaning that the nation did not meet its production quota of 1.8m bpd during the period.
Crude oil theft was identified as the key factor responsible for Nigeria’s inability to meet either the budget benchmark or OPEC quota.
The Nigerian Upstream Petroleum Regulatory Commission, NUPRC, put the nation’s condensate output at 233,531 bpd (Blended and Unblended) during the period, indicating that the nation did not meet its set target.
The National President, Oil and Gas Service Providers Association of Nigeria, Mazi Colman Obasi, in his reaction to the unfolding development said: “The current high crude oil prices currently standing at $92 per barrel could have reduced the negative impact of low output on the nation.
“But the nation is currently subsidising fuel import directly or indirectly as the prices of refined petroleum products have risen significantly in the global market.”
On his part, the Country Chair of Shell Companies in Nigeria, Osagie Osunbor, who confirmed the severity of oil theft in the company’s briefing, said: “We faced our biggest operational challenge in many years at SPDC, where a significant decline in crude receipts at the Bonny Oil and Gas Terminal resulted in our declaration of force majeure in March 2022.
‘’I am pleased to say that the force majeure on the Bonny export programme was lifted in March 2023.
“Unfortunately, along with other operators in Nigeria, SPDC continues to face the twin challenges of sabotage and crude oil theft, each of which not only deprives our country and our people of billions of dollars of tax revenue, but also endangers people’s lives.
“Sadly, we were reminded of these dangers in March 2023 when a fire incident occurred at the site of an illegal connection used for crude theft on the Rumuekpe-Nkpoku trunk line in Rivers State. The line was not operational at the time of the fatal incident.
“Crude theft poses a serious environmental risk that impacts not just oil and gas operations but also our communities. Our teams continue to collaborate with the Nigerian government and other stakeholders to eradicate crude theft from our facilities.”
Prof Uche Uwaleke, President, Association of Capital Market Academics of Nigeria, ACMAN, said: “It is a worrisome development. If crude oil production was 1.2mbpd against an OPEC quota of 1.74mbpd, it means that volume deficit is in excess of 500,000 barrels per day.
“This translates to 15 million barrels per month. At a conservative oil price of 85 dollars per barrel (current price is over 90 dollars), it means Nigeria lost over $1.2 billion in one month alone (or nearly N1 trillion @ N765 exchange rate).
“The lost $1.2 billion monthly inflow could have gone a long way to boost external reserves and improve liquidity in the FX market.
‘’The major cause is crude oil theft and the solution is to squarely deal with it using our security forces, working in conjunction with local communities in oil-producing areas.”
Meanwhile, David Adonri, the Executive Vice-Chairman at HIGHCAP Securities Limited, said: “The targeted budget of 1.69 mbpd was unrealistic. In the recent past, Nigeria’s crude oil production had hovered around 1 mbpd.
“Pervasive oil theft and declining investment in the upstream sector have stifled production. The reliability of production data is another challenge due to endemic organized corruption in the upstream sector.
‘’The production target is a principal assumption belying the federal budget for 2023. Its under-performance will derail the budget and possibly put pressure on the government to borrow or rationalize expenditure.
“The circumstances surrounding the low production level are well known to the government.”
