Hobnob News — The Central Bank of Nigeria (CBN) has identified ageing pipeline infrastructure and operational inefficiencies as the primary causes of the sharp decline in oil revenue for the third quarter of 2024.
In its latest economic report, the CBN revealed that oil revenue dropped by 24.72% to N1.30 trillion compared to the second quarter of the year. The decline, attributed to reduced collections from petroleum profit tax and royalties, also fell significantly short of the quarterly target by 75.39%. The report noted, “Frequent shut-ins resulting from deteriorating oil pipelines and installations were a major factor.”
Despite a slight increase in crude oil production to 1.33 million barrels per day (mbpd) from 1.27 mbpd in the previous quarter, challenges such as theft, vandalism, and infrastructure deficits continued to hinder revenue performance. The inability to meet OPEC production quotas further exacerbated the situation.
Global factors also played a role, with the average spot price of Nigeria’s Bonny Light crude dropping by 5.45% to $82.23 per barrel during the quarter due to subdued demand. Similar price declines were observed in other benchmarks, including Brent and the OPEC Reference Basket.
While the oil sector struggled, the Nigerian economy recorded a growth rate of 3.46% in Q3 2024, up from 3.19% in Q2, primarily driven by the non-oil sector, which contributed 3.18 percentage points to GDP growth. However, oil sector growth slowed to 5.17% year-on-year, compared to 10.15% in the previous quarter.
The fiscal impact was considerable, with federally collected revenue falling 23.71% below the budget benchmark despite a 7.48% quarter-on-quarter increase. The fiscal deficit, while narrowing by 22.51% compared to the previous quarter, was 43.88% higher than the quarterly target, underlining persistent fiscal challenges.
The report concluded that Nigeria’s ambition to achieve an oil production target of 2 mbpd by the end of 2024 remains uncertain due to these unresolved issues.
