Federal Government unable to meet 650m barrels target over crude-backed loans

• Loss may hit $10.73b as country fails to meet production benchmarks in last 10yrs
• Forex crisis to persist amidst elusive economic diversification plan
• Tinubu, NASS jettison economic analysts, place economy recovery on uncertain oil market
• Stakeholders insist budget assumptions unrealistic 

Nigeria may fail to produce about 138 million barrels of crude oil worth $10.73 billion in 2024 even as President Bola Tinubu sets Nigeria’s N28 trillion 2024 budget on an unrealistic oil and gas outlook that has consistently failed in the last 10 years.

While President Bola Tinubu is projecting to increase revenue from oil and gas from N2.23 trillion in 2023 to N7.69 trillion in 2024, representing an increase of 344 per cent, relative to 2023, oil production is expected to move to 1.78 million barrels per day against the current 1.250 million amidst uncertain prices.

At 1.78 million barrels a day, the country is expected to produce 649.7 million barrels of crude this year. With only 1.4 million described as a feasible average by historical analysis and stakeholders, a shortfall of about 400,000 barrels a day or 138 million barrels a year is expected.

This comes as stakeholders are warning against the continuous reliance on oil revenue as the many attempts of the government to diversify the economy faces an uphill climb.

The Guardian learnt that both the president as well as the National Assembly banked on crude oil in the budget despite being directly warned by their consultants that the economy may be playing to the gallery in 2024.

There are indications that the current foreign exchange crisis may remain going by oil outlook even as the country would be busy finding crude to pay back loans already taken from Afreximbank as well as uncleared Direct Sales Direct Purchase crude obligations even as most major oil producers are divesting into other regions.

According to Afreximbank, the 5-year facility carries a margin of 6.0 per cent per annum above the 3-month secured overnight financing rate (SOFR). The transaction structure has an embedded price balance mechanism where 90 per cent of all excess cash from the sale of the committed barrels (after debt service) will be released while the balance of 10 per cent will be used to prepay the facility, effectively shortening the final maturity of the facility and freeing cash flow from future pledged cargoes for use by Nigeria.

The data for oil production in Nigeria is consistently not transparent. In September, while Group Chief Executive of Nigeria National Petroleum Company Limited (NNPCL), Mele Kyari said Nigeria was producing 1.67 million barrels of oil and condensates per day, Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that the production was 1.3 million barrels per day (bpd).

Sadly, that was all time high for the period as the production was 14 per cent higher than what the country pumped in the preceding month of August 2023. In 2023, the production was largely between 900,000 to 1.3 million bpd.

In November, data from the NUPRC showed that the country’s crude oil production dropped to 1.250 million barrels even as the Organisation of Petroleum Exporting Countries (OPEC) corroborated the information, stating that the production stands at 1.25 million barrels per day from 1.35 million in October 2023. In December, the production went to 1.300 million barrels per day.

OPEC had also pegged Nigeria’s production quota at 1.5 million barrels per day.Going by wave of divestment, warehousing of more oil blocks under the NNPC E & P with limited resources, continuous theft and vandalism despite surveillance contracts, fiscal and other challenges that have reduced production in deep-water to record low, projection by The Guardian showed that at best the country’s oil production may average 1.4 million barrels per day in 2024, leaving the nation with a deficit of 380,000 barrel per day out of the 2024 oil production benchmark of 1.7 million barrels per day.

In a year, the deficit translates to 138 million barrels, which if sold at $77.63 per barrel, which the price was trading yesterday and the nearest projection for 2024, the monetary value would stand at $10.73 billion. This is about three times the NNPC is borrowing from Afreximbank.

In 2013, Nigeria’s oil production stood at 2.2 million barrels per day (bpd), the 2013 budget projected 2.5 million bpd, it was 2.2 million bpd in 2014, the budget benchmark was 2.38 million bpd. The production was 2.1 bpd in 2015, the budget for that year projected 2.28 million bpd, it was 1.8 million bpd in 2016, the budget benchmark was 2.2 million bpd. In 2017, crude oil production was 1.9 million bpd but the budget benchmark was 2.2 million bpd. The production was 2 million bpd in 2018 but the benchmark was 2.3 million bpd, it was 2.1 million barrels per in 2019 but the budget benchmark was 2.3 billion bpd. In 2020 when the production was 1.65 million bpd, the benchmark is 1.8 million bpd. The production was 1.6 million bpd in 2021, the budget benchmark was 1.86 million bpd while in 2022, production was 1.4 million bpd, the benchmark was 1.88 million bpd.

In 2023 when the oil production plummeted to 1.4 million, the benchmark stood at 1.69 million bpd. In the 2024 budget, while Nigeria is currently producing 1.250 million bpd on the average, budget benchmarks considered a production of 1.78 million and oil price of $74 per barrel.This comes at a time that the Nigerian National Petroleum Company Limited is expected to pay back on crude the $3 billion loan taken from the AfreximBank and being raised through oil traders.

The State Minister of Petroleum (Oil), Heineken Lokpobiri, NNPC’s Kyari and the newly constituted board of the supposed commercialised NNPC had promised that the country’s oil production would hit between 1.7 million barrel per day and 2 million bpd, most stakeholders however warned that the statements were only to score political points.

Chairman of International Energy Services Limited, Dr Diran Fawibe was not convinced Nigeria would increase crude oil production significantly in 2024 given that most oil producers are holding back their investment even as the onshore and shallow water are largely affected by massive theft and NNPC would need more resources to boost production from its exploration and production subsidiary.

Fawibe noted that there have equally not been serious prosecutions to show that the government is serious in dealing with crude oil theft even when about 90 per cent of oil is being lost because reaching the terminal and previous investigations remain a mirage.

He said while fields like Bonga, Prowei and Owowo among others have prospects, most international oil companies are putting their money in other countries as the cost of oil production escalates in Nigeria.

An insider at the National Assembly told The Guardian that the committee on the budget was warned on oil production in the 2024 budget but they declined the expert opinion, as they insisted that the nation could not do two million barrels.