The Central Bank of Nigeria has revealed that the notable drop in oil revenue for the third quarter of 2024 is primarily linked to outdated pipeline infrastructure and operational inefficiencies.
In its latest economic report, the central bank reported that oil revenue declined by 24.72 percent to N1.30 trillion compared to the second quarter of 2024. This significant decrease was attributed to lower receipts from petroleum profit tax and royalties.
The report highlighted that the revenue fell 75.39 percent short of the quarterly target, mainly due to frequent shut-ins caused by the deterioration of pipelines and oil installations.
Despite a slight increase in crude oil production, rising to 1.33 million barrels per day from 1.27 mbpd in the previous quarter, challenges such as theft, vandalism, and inadequate infrastructure have severely impacted Nigeria’s oil revenue.
Moreover, the ageing infrastructure has not only lowered efficiency but has also hindered the country’s ability to meet its OPEC production quota. The report pointed out that global factors have exacerbated these issues, with the average spot price of Nigeria’s Bonny Light crude decreasing by 5.45 percent to $82.23 per barrel during the quarter, indicative of weakened global demand. Similar declines were observed in other crude benchmarks, including Brent and the OPEC Reference Basket.
While the oil sector faced challenges, the broader Nigerian economy experienced a growth rate of 3.46 percent in Q3 2024, an increase from 3.19 percent in the previous quarter, primarily driven by the non-oil sector, which contributed significantly to total GDP growth.
However, the oil sector’s growth slowed to 5.17 percent year-on-year, compared to 10.15 percent in the previous quarter, due to operational inefficiencies and falling crude oil prices. The fiscal implications of these trends were noteworthy, with federally collected revenue falling 23.71 percent short of the budget benchmark, despite a quarter-on-quarter increase of 7.48 percent.
Though the fiscal deficit narrowed by 22.51 percent compared to the previous quarter, it still expanded by 43.88 percent relative to the quarterly target, illustrating persistent fiscal pressures. The report concluded by emphasizing that Nigeria’s ambition to achieve an oil production target of 2 mbpd by the end of 2024 is under substantial threat due to these ongoing challenges.
