Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 23)

The June edition of the Monthly Oil Market Report (MOMR) of the Organization of Petroleum Exporting Countries (OPEC) shows that Nigeria produced an average of 1,262 million barrels per day (mbpd) in May 2022.2 This indicates a 3.45 percent decline from 1,306 mbpd produced in the preceding month, April. The continuous decline in production is partly due to poor oil sector management, theft, and ageing production facilities. The report also noted that the price of the OPEC reference basket of crude oil rose to $113.87 per barrel over the same period. As an oil-producing nation, the rising crude oil price should serve as a revenue windfall. However, Nigeria is unlikely to experience a wholesome benefit due to the following factors – low oil production, continued petroleum subsidy regime, and increased importation of refined petroleum products. In Nigeria, crude oil accounted for 79.2 percent of total exports in Q1 2022, suggesting that crude oil is still the most significant source of foreign exchange.3 Therefore, the continuous decline in crude oil production indicates a loss of foreign exchange earnings that could have helped bolster the country’s foreign reserves and reduce the pressure on the domestic currency. Consequently, the government is encouraged to intensify efforts at replacing ageing infrastructure and providing immediate and lasting solutions to the insecurity in oil-producing areas. These interventions are essential in ensuring that the country reverses the declining trend of crude oil production and experiences maximum earnings gain associated with the current high crude oil prices.

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