The Central Bank of Nigeria (CBN) has attributed the significant decline in oil revenue in the third quarter of 2024 to ageing pipeline infrastructure and operational inefficiencies. According to the apex bank’s latest economic report, oil revenue fell by 24.72% to N1.30 trillion in the third quarter, compared to the previous quarter. This decline was mainly due to lower receipts from petroleum profit tax and royalties, coupled with the frequent shut-ins resulting from deteriorating oil pipelines and installations.
The CBN report highlighted that the oil revenue shortfall was a staggering 75.39% below the quarterly target, primarily due to shut-ins caused by aging infrastructure. Despite a modest increase in crude oil production, which rose to 1.33 million barrels per day (mbpd) from 1.27 mbpd in the second quarter, the oil sector faced several challenges, including theft, vandalism, and inadequate infrastructure.
“Oil revenue fell by 24.72% to N1.30 trillion, relative to Q2 2024, due to lower receipts from petroleum profit tax and royalties. It was also 75.39% short of the quarterly target due to shut-ins, arising from ageing oil pipelines and installations,” the report stated.
The report further noted that the country’s ability to meet its OPEC production quota was undermined by the deteriorating infrastructure. Additionally, global market factors contributed to the poor performance, with the average spot price of Nigeria’s Bonny Light crude falling by 5.45% to $82.23 per barrel. This drop reflected subdued global demand, which also impacted other crude benchmarks like Brent and the OPEC Reference Basket.
While the oil sector struggled, Nigeria’s overall economy recorded a growth of 3.46% in Q3 2024, up from 3.19% in the previous quarter. This growth was largely driven by the non-oil sector, which contributed 3.18 percentage points to the overall GDP growth. However, the oil sector’s growth slowed to 5.17% year-on-year, compared to 10.15% in the previous quarter, reflecting the cumulative impact of operational inefficiencies and declining crude prices.
The report also highlighted the fiscal implications of the oil sector’s underperformance. Federally collected revenue fell 23.71% short of the budget benchmark, although there was a 7.48% increase in revenue on a quarter-on-quarter basis. The fiscal deficit, while narrowing by 22.51% compared to the previous quarter, widened by 43.88% relative to the quarterly target, reflecting ongoing fiscal pressures.
The CBN’s report concluded by noting that Nigeria’s goal of achieving an oil production target of 2 million barrels per day (mbpd) by the end of 2024 remains under serious threat due to the ongoing challenges in the oil sector.
