Nigeria, Africa’s largest oil producer, has lengthy relied on crude oil to gasoline its economic system. Nevertheless, current years have seen a decline in international oil costs and manufacturing challenges, impacting the nation’s financial progress.
But, 2024 may provide a glimmer of hope, with consultants suggesting a mixture of elevated drilling, fuel commercialisation, and the incoming Ajaokuta-Kaduna-Kano fuel pipeline mission, amongst others, as methods oil can as soon as once more jump-start Nigeria’s financial engine.
Cordros Securities Restricted, in its 2024 full-year outlook, projected that the economic system will stay on a progress trajectory, supported by enchancment within the oil sector amid the federal government’s ongoing efforts to curb pipeline vandalism and oil theft and, gradual restoration from the affect of coverage reforms applied within the prior yr, in addition to continued resilience within the companies sector.
Listed here are 5 methods oil can jump-start Nigeria’s financial journey:
Elevated drilling actions
Jide Pratt, nation supervisor of TradeGrid, mentioned one of many low-hanging fruits that may enhance the oil and fuel sector is elevated drilling actions.
The nation’s rig depend, a significant index of measuring actions within the upstream sector, dropped month-on-month by 13.3 % to 13 in October 2023 from 15 within the previous month.
This revealed that there was restricted funding and actions in the course of the interval, in response to the November 2023 Month-to-month Oil Market Report of the Group of Petroleum Exporting International locations.
Fuel commercialisation
The Nigerian Fuel Flare Commercialisation Programme (NGFCP) is a chance for the federal and state governments, trade stakeholders, ethnic nationalities, and native communities to work collectively to resolve an oil subject unacceptable apply, in response to the Nigerian Upstream Petroleum Regulatory Fee (NUPRC).
Final September, the fee mentioned it had granted 42 corporations fuel flaring licences within the 2022 Nigerian Fuel Flare Commercialisation Programme public sale course of.
The fee, whereas asserting the end result of the bidding train in an announcement, mentioned issuance of letters of award to the profitable awardees was ongoing.
In furtherance of its mandate in Part 7 (e) and Part 105 (2) of the Petroleum Trade Act, 2021, the NUPRC, within the third quarter of 2022, restructured the NGFCP and re-launched the programme to align with the provisions of the PIA, in addition to replicate prevailing financial and operational realities.
Refining
Vetiva Capital Administration Restricted, in its macroeconomic outlook, projected that the refinery initiatives within the works, together with the Dangote refinery and government-owned crops in Port Harcourt, Warri and Kaduna, would assist enhance the economic system.
“Whereas our progress estimate excludes any ramp-up in refining capability, our fashions present that an enchancment in nationwide refining capability by 50,000 bpd may add +0.1 % to GDP.”
Cordros Securities expects the resumption of actions on the Dangote refinery, Port Harcourt refinery, and modular refineries to place an finish to the importation of petroleum merchandise into the nation in 2024.
The AKK pipeline
The Nigerian Nationwide Petroleum Firm Restricted (NNPC) has mentioned the $2.8 billion Ajaokuta-Kaduna-Kano fuel pipeline mission being constructed by Oilserve Restricted can be inaugurated subsequent month.
In response to Pratt, the 614km-long pipeline being developed by the NNPC to move pure fuel from southern Nigeria to central Nigeria can be a key driver when it comes on stream later within the yr.
Elevated FDI
Funding inflows into the Nigerian economic system dipped by 33 % to $1.03 billion within the second quarter of 2023 from $1.535 billion in Q2 2022.
In response to the Nationwide Bureau of Statistics (NBS) report, ‘different funding’ topped sources of funding, accounting for 81.28 % ($837.34 million) of whole capital imported within the interval and better than $435.76 million recorded in Q1.
In response to Pratt, the increment in international direct funding is paramount to actualising funding in drilling actions.
In a report revealed by Africa Oil & Fuel Report, an power intelligence publication, Austin Avuru, government chairman of AA Holdings, mentioned that Nigeria’s oil industry is dealing with a stark actuality test because it wants 45 new rigs to succeed in “regular” manufacturing ranges of two.1 million barrels per day (bpd) by 2025.
Avuru mentioned to arrest the pure decline and add 800,000bpd over two years would require 426 wells together with 106 exploration and appraisal wells in addition to 320 improvement wells.
