Nigeria’s Oil Revenue Plummets Amid Ageing Pipelines and Operational Woes
Nigeria’s oil revenue dropped sharply in the third quarter of 2024, falling by 24.72% to ₦1.30 trillion compared to the previous quarter, according to the Central Bank of Nigeria’s (CBN) latest economic report. The decline, attributed to ageing pipeline infrastructure and operational inefficiencies, underscores the structural challenges facing the country’s oil sector.
The report revealed that oil revenue fell short of its quarterly target by a staggering 75.39%, with frequent shut-ins caused by deteriorating pipelines and installations compounding the shortfall.
“Oil revenue fell by 24.72% to ₦1.30 trillion, relative to the level in Q2 2024, on account of lower receipts from petroleum profit tax and royalties,” the report stated. “It was also 75.39% short of the quarterly target due to shut-ins, arising from ageing oil pipelines and installations.”
Production Challenges and Global Factors
Despite a modest increase in crude oil production to 1.33 million barrels per day (mbpd) from 1.27 mbpd in the second quarter, theft, vandalism, and infrastructure deficits continued to undermine performance. The CBN highlighted that these inefficiencies hindered Nigeria’s ability to meet its OPEC production quota.
Global factors further exacerbated the situation, with the average spot price of Nigeria’s Bonny Light crude falling by 5.45% to $82.23 per barrel during the quarter, reflecting subdued demand. Other benchmarks, including Brent and the OPEC Reference Basket, also experienced similar declines, adding to the sector’s woes.
Economic Growth Driven by Non-Oil Sector
While the oil sector floundered, Nigeria’s economy recorded growth of 3.46% in Q3 2024, up from 3.19% in the previous quarter, driven primarily by the non-oil sector. This segment contributed 3.18 percentage points to the overall GDP growth, offsetting the oil sector’s slowed year-on-year growth, which dropped to 5.17% from 10.15% in Q2 2024.
Fiscal Implications and Looming Deficit
The decline in oil revenue had significant fiscal implications. Federally collected revenue fell 23.71% short of the budget benchmark, even as quarter-on-quarter revenue increased by 7.48%. The fiscal deficit, while narrowing by 22.51% compared to the previous quarter, widened by 43.88% relative to the quarterly target, highlighting persistent fiscal pressures.
The report sounded a cautionary note about Nigeria’s goal of achieving an oil production target of 2 mbpd by the end of 2024, stating that the ambition remains under threat unless critical infrastructure challenges are addressed.
As the oil sector struggles with operational inefficiencies and external pressures, the government’s reliance on the non-oil sector for economic stability may grow—a shift that could redefine Nigeria’s fiscal and developmental priorities in the years to come.
