Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reveals that Nigeria’s average daily crude oil production (excluding condensates) decreased to 1.48 million barrels per day (mbpd) in December 2024, compared to 1.49mbpd in November. When including condensates, the total output reached 1.67mbpd, down from 1.69mbpd the previous month but significantly higher than the 1.34mbpd recorded in December 2023.
Despite this slight decline, the 2024 full-year crude oil production (excluding condensates) averaged 1.34mbpd, a modest improvement over 1.24mbpd in 2023. However, the December figure fell short of the 1.78mbpd target outlined in Nigeria’s 2024 budget and the 1.50mbpd OPEC quota.
Key Challenges Impacting Production
The persistent shortfall in crude oil production is attributed to several factors:
- Pipeline Vandalism: Ongoing damage to oil pipelines disrupts production.
- Oil Theft: Rampant theft undermines industry profitability.
- Infrastructure Deficits: Outdated facilities limit production capacity.
- Reduced Investments: Uncertainty in the sector deters new investments.
However, government efforts to enhance security in oil-producing regions have yielded marginal improvements.
Oil Pricing Trends
The price of Nigeria’s crude oil benchmark, Bonny Light, closed 2024 at $76 per barrel, below the $79 per barrel average recorded in 2023 and the $78 per barrel benchmark in the 2024 budget. The decline is largely attributed to reduced global demand driven by a slowdown in China’s economic growth.
Outlook for 2025
The 2025 budget proposal sets ambitious targets for crude oil production at 2.06mbpd and an oil price benchmark of $75 per barrel. While these targets reflect optimism, legacy challenges in production capacity and global oil market dynamics could hinder their realization.
Global factors likely to influence oil trends include:
- China’s Recovery: Economic stimulus in China may drive demand, supporting higher oil prices.
- Geopolitical Tensions: Renewed sanctions and conflicts could tighten global supplies.
- U.S. Energy Policies: President-elect Trump’s plans to ramp up domestic oil production could increase global supply, exerting downward pressure on prices.
Implications for Nigeria
A bearish global oil market, coupled with ongoing domestic challenges, could offset the benefits of increased production, undermining Nigeria’s fiscal position. While security measures and sector investments offer hope for sustained growth, achieving the 2.06mbpd target remains a significant hurdle.
Nigeria must focus on addressing systemic issues in the oil sector to capitalize on potential gains and mitigate risks to its economy in 2025.
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