According to the African Energy Chamber (AEC), Nigeria and other oil-producing African countries are set to confront severe economic hurdles in 2024 due to an anticipated significant declinein crude oil production across the continent.
The bleak outlook arises as Nigeria grapples with economic strains resulting from decreased oil production, attributed to theft, vandalism, and a challenging operating environment. Despite the nation’s 2024 budget built on an estimate of 1.7 million barrels of oil production, reports indicate that the country achieved approximately 1,346,562 barrels per day in September 2023.
The AEC’s ‘State of African Energy 2024 Outlook’ report forecasts a substantial drop in Africa’s oil production from 6.9 million barrels per day to 6.62 million barrels per day. This reduction comes amid expectations for African nations to locally refine their crude, with multiple refinery projects slated to commence operations soon.
While several African countries have existing or planned refinery projects, Nigeria, with its three state-owned refineries and additional private ventures, faces challenges in obtaining sufficient crude oil for operations. Additionally, gas projects in the country are encountering obstacles due to insufficient gas feedstock.
NJ Ayuk, Executive Chairman of the African Energy Chamber, stressed the urgency of leveraging oil and gas resources for economic development, citing the crucial role oil revenue plays in funding social programs, infrastructure, and technology transfers.
However, challenges persist, as regulatory bodies, like the Nigerian Upstream Regulatory Commission, aim to enforce domestic crude supply obligations on oil producers. Despite threats of fines and penalties, reports indicate a significant shortfall in the delivery of crude to domestic refineries.
Various stakeholders, including Nigeria’s National Assembly, International Oil Companies, and Independent Petroleum Producers Group, are seeking solutions to address issues such as crude oil theft, regional insecurity, fiscal challenges, and joint venture complications plaguing the oil and gas sector.
This situation significantly impacts Nigeria’s foreign exchange, debt, and overall development, given that the oil and gas sector accounts for more than 85 percent of foreign exchange earnings. Currently producing around 1.3 million barrels per day, Nigeria’s oil production has declined significantly from 2011 when it stood at approximately 2.4 million barrels per day.
