The Central Bank of Nigeria (CBN) has attributed the sharp decline in oil revenue during the third quarter of 2024 to ageing pipeline infrastructure and operational inefficiencies.
In its latest economic report for Q3 2024, the apex bank revealed that oil revenue dropped by 24.72% to ₦1.30 trillion, compared to the second quarter of the year.
This decrease was primarily due to reduced collections from petroleum profit tax and royalties.
The report further highlighted that the revenue figure fell 75.39% short of the quarterly target, mainly due to frequent shut-ins caused by deteriorating pipelines and installations.
It stated: “Oil revenue fell by 24.72% to ₦1.30 trillion relative to Q2 2024, on account of lower receipts from petroleum profit tax and royalties. It was also 75.39% below the quarterly target due to shut-ins arising from ageing oil pipelines and installations.”
Despite a modest increase in crude oil production to 1.33 million barrels per day (mbpd) from 1.27 mbpd in the previous quarter, the report noted that theft, vandalism, and infrastructure deficits significantly hindered oil revenue. The ageing infrastructure not only reduced operational efficiency but also impacted Nigeria’s ability to meet its OPEC production quota.
Additionally, global factors exacerbated the situation, as the average spot price of Nigeria’s Bonny Light crude declined by 5.45% to $82.23 per barrel during the quarter, reflecting weakened global demand. Similar trends were observed in other crude benchmarks, including Brent and the OPEC Reference Basket.
While the oil sector struggled, Nigeria’s economy recorded a GDP 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 overall GDP growth.
The oil sector’s year-on-year growth slowed to 5.17%, down from 10.15% in the previous quarter, as operational challenges and declining crude prices continued to weigh on performance.
The fiscal implications were substantial, with federally collected revenue falling 23.71% short of the budget benchmark, despite a 7.48% quarter-on-quarter increase. The fiscal deficit narrowed by 22.51% compared to Q2 but widened by 43.88% relative to the quarterly target, underscoring persistent fiscal pressures.
The report concluded that Nigeria’s target of achieving 2 million barrels per day (mbpd) of oil production by the end of 2024 remains at risk due to these ongoing challenges.
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