By Joy Baba-Yesufu
The Central Bank of Nigeria (CBN) has pointed to ageing pipeline infrastructure and operational inefficiencies as the primary reasons for the sharp decline in oil revenue during the third quarter of 2024.
According to the CBN’s latest economic report, oil revenue dropped by 24.72% amounting to N1.30 trillion, compared to the second quarter of 2024. This decrease is attributed to lower receipts from petroleum profit tax and royalties.
The report highlighted that revenue fell 75.39% below the quarterly target, primarily due to frequent shut-ins resulting from deteriorating pipelines and installations.
The report stated, “Oil revenue fell by 24.72% to N1.30 trillion relative to Q2 2024, due to lower receipts from petroleum profit tax and royalties, and was 75.39% short of the quarterly target because of shut-ins caused by ageing oil pipelines and installations.”
Despite a slight increase in crude oil production to 1.33 million barrels per day (mbpd) from 1.27 mbpd in the previous quarter, Nigeria’s oil revenue performance was severely hampered by issues such as theft, vandalism, and insufficient infrastructure. The ageing infrastructure not only decreased efficiency but also hindered the country’s ability to meet its OPEC production quota.
The report further noted global factors exacerbating the situation. The average spot price of Nigeria’s Bonny Light crude fell by 5.45% to $82.23 per barrel during the quarter due to weakened global demand. Similar price declines were observed in other benchmarks, including Brent and the OPEC Reference Basket.
While the oil sector faced challenges, the Nigerian economy grew by 3.46% in Q3 2024, an increase from 3.19% in the previous quarter. This growth was largely driven by the non-oil sector, which contributed 3.18 percentage points to total GDP growth.
However, the oil sector’s growth slowed to 5.17% year-on-year, down from 10.15% in the previous quarter, reflecting the impact of operational inefficiencies and declining crude oil prices.
The report concluded with a warning that Nigeria’s goal of achieving an oil production target of 2 mbpd by the end of 2024 remains jeopardized by these ongoing challenges.
