Nigeria’s debt has exceeded its revenue in the first four months of the year despite high oil prices, Nigeria’s Budget Office has revealed on its website.
Oil-rich Nigeria, unlike other crude oil producers, has found it impossible to reap the benefits of today’s high oil prices, with oil revenues coming in 61% below target during the period. That’s despite crude oil trading at highs not seen in years.
Nigeria’s crude oil production was relatively steady at 1.376 million bpd in the first quarter of this year compared to the previous quarter, according to OPEC’s Monthly Oil Market Report, and 34,000 bpd below the same quarter last year. While Nigiera’s production slipped further in June 2022 to 1.238 million bpd, Nigeria’s oil revenue problem didn’t stem from a drop in production.
Instead, Nigeria continues to battle oil theft, pipeline vandalism, and most critically, high gasoline prices, which the country subsidizes.
The severe revenue shortfall does not allow Nigeria to service its debt.
The cost of Nigeria’s gasoline subsidy will be about 10 times what it had originally budgeted, Nigeria’s President Muhammadu Buhari revealed in an April letter to lawmakers. That cost of that subsidy is expected to be just south of $10 billion.
Unlike other major oil producers that have benefited handsomely from higher crude oil prices, Nigeria has negligible refining capacity, forcing it to import nearly all of the gasoline it consumes. And Nigeria must pay today’s high costs for that gasoline while continuing to sell it onto the consumer for much less in order to keep prices at 39 cents.
The value of Nigeria’s petroleum imports far outweighs the value of its petroleum exports—to the tune of $43 billion.
Nigeria has toyed with the idea of ending the gasoline subsidies, but the specter of fuel protests caused the President to scrap those plans.
NB: Julianne Geiger wrote this article for Oilprice.com
