September sees a 20-month peak with 1.57 million bpd in crude oil production

In the most recent monthly report released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the nation’s average oil production surged to a 20-month peak in September, hitting a substantial 1.57 million barrels per day (mbpd). This noteworthy increase in oil production is indicative of a promising upturn in Nigeria’s oil sector, offering a glimmer of hope in a landscape that has been fraught with challenges and disappointments.

The report presented a remarkable 11.1% upswing in crude oil output, encompassing condensate, when compared to the figures from August. More impressively, when juxtaposed with the lowest production levels recorded in April, which stood at 1.23 mbpd, the September data revealed a staggering 25.6% surge in oil production. In practical terms, this meant that Nigeria successfully pumped a total of 47.2 million barrels, inclusive of condensates, during the month of September.

This stands as the highest production level recorded since the beginning of 2022, specifically since January when the figures reached 51.9 million barrels.

Nigeria’s oil production has been facing a series of setbacks over the past years, primarily attributed to persistent issues like crude oil theft in the Niger Delta, periodic crude oil terminal maintenance, production shutdowns, and the glaring insufficiency of investments in the upstream oil and gas sector. These combined challenges have contributed to a substantial decline in the nation’s oil production, subsequently affecting the revenue streams for both the Nigerian government and the international and indigenous oil companies operating within the nation.

The evident result of this protracted dip in oil production is significant revenue losses, causing considerable disruptions within the Nigerian economy, including the foreign exchange (FX) market. The country has been grappling with severe FX shortages, leading to the devaluation of the naira, which has hit record lows against the US dollar. The fundamental cause behind this dire FX shortage is the considerable decline in Nigeria’s oil production capacity.

Crude oil exports constitute a dominant source of foreign exchange for the nation. Therefore, the increase in oil production has the potential to alleviate these pressing FX challenges by enhancing the supply of foreign exchange, thereby addressing the prevailing liquidity issues within the FX market. The heightened production levels can inject a much-needed financial boost, providing the Nigerian government with additional revenue, while simultaneously supporting international and domestic oil operators in their efforts to stabilize their financial outlooks.

Nevertheless, the challenges are not to be underestimated, and the government’s measures to combat these issues have been met with mixed results. The Nigerian government has embarked on various initiatives to tackle crude oil theft, including reinforcing pipeline surveillance and clamping down on oil theft activities. However, the results of these efforts have been inconsistent, with the theft and illegal bunkering of crude oil persisting as a significant problem in the Niger Delta region.

Over the course of seven months, beginning in September 2022, the oil production output demonstrated signs of a recovery, suggesting that Nigeria was on the right path towards an oil resurgence. However, the subsequent decline in production that commenced in February 2023 serves as a reminder that the journey to restoring and maintaining higher production levels is far from straightforward and requires a concerted and sustained effort.

The economic consequences of this low oil production have been felt far and wide. It has not only impacted the government’s ability to generate revenue and meet its budgetary obligations but has also affected the country’s exchange rate and overall financial stability. To address these challenges, a multi-faceted approach is necessary, one that includes promoting transparency, security, and investment in the oil sector, while also addressing the root causes of oil theft.

The improved oil production figures for September are undoubtedly promising. Still, they also underscore the need for continued vigilance and proactive measures to safeguard and enhance the nation’s oil production capacity. Achieving sustainable growth in the Nigerian oil sector is not only vital for the nation’s fiscal health but also for its broader economic stability and future development.