Based on the latest report from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s average crude oil production dropped by 7% to 1.23 million bpd (ex-condensates) in March 2024 from 1.32mbpd in February, marking the second consecutive month on month decline, after reaching a 2-year high of 1.43mbpd in January 2024. The decrease in March was primarily due to production drops in four major terminals. Compared to February, production at Bonny, Bonga, and Forcados terminals declined by 33%, 21% and 14% respectively. Following the release of the March crude oil data, Sen. Heineken Lokpobiri, the honourable minister for state petroleum resources, released a circular stating that the shortfall in the country’s oil production volume was mainly due to issues on the Trans Niger Pipeline and maintenance activities by some oil companies, which have been resolved.

Oil output from Nigeria has been low in recent years, and the country recorded its lowest oil production volume of 0.94mbpd in September 2022. The country’s low production has been attributed to massive crude oil theft in Nigeria’s oil-rich Niger Delta, ageing oil fields, poor crude oil terminal maintenance, shutdowns, and reduced investments in the upstream oil and gas sector. The situation has led to significant revenue losses for the country. The federal government has sustained efforts to reinforce pipeline surveillance and clamp down on oil theft. However, results appear slow and inconsistent.

Nigeria has recently struggled with significant FX shortages, causing the Naira to fall to a record low of N1,915 against the dollar. That said, there has been a substantial improvement in FX liquidity in recent weeks, causing an appreciation in the value of the Naira to N1,142.38/US$ as of Friday at the I&E window. The improvement in FX Liquidity seen so far has been primarily attributed to foreign portfolio investments in government bonds, which come with high repayment costs. Crude oil receipts form a primary source of FX for the country. A significant increase in production will increase FX supply and alleviate liquidity issues more sustainably in the FX market. In our view, the sustainability of current FX rates in the coming months hinges partly on increased crude oil production volumes and tackling every bottleneck that affects low production should be of paramount concern to all stakeholders.