Nigeria’s Oil Sector Strengthens, but Non-Oil Sector Faces Challenges

There are clear indications that Nigeria’s economy is shifting back towards being led by the oil sector, while the gains in the non-oil sector are beginning to reverse. The Organisation of Petroleum Exporting Countries (OPEC) has stated that Nigeria is facing new challenges in the crude oil sector, despite the ongoing rebound.

The oil sector is displaying positive signs of recovery, with evidence of increasing activities in the upstream sector, as well as stable export prices. This includes a significant year-on-year increase in the rig count, an index measuring activities in the upstream sector, indicating heightened drilling activities, new oil wells coming online, and stable export prices for oil.

The increase in oil production has been substantial, reaching over 40 percent from below one million barrels per day (mbpd) last year to 1.45 mbpd in October 2023. Major oil terminals have shown strong performance in the third quarter of 2023, with significant production increases recorded across several terminals.

The increased oil output can be attributed to the resumption of production and export of Nembe crude by the NNPC/Aiteo Joint venture. This has contributed to a rise in Nigeria’s oil exports to Europe, filling supply gaps left by the ban on Russian crude. As a result, Nigeria’s crude flow to Europe has increased significantly.

Industry experts and economists are recommending increased investment in Nigeria’s oil and gas industry to meet future targets and maximize the value of the sector for inclusive growth. While the recovery of the oil sector is viewed positively, analysts have noted that non-oil sector growth has weakened due to various factors, including actions taken by the Central Bank of Nigeria, increased domestic interest rates, and lingering currency pressures affecting the manufacturing sector.

Despite the positive outlook for the oil sector, there are challenges ahead, particularly with OPEC’s forecast for Nigeria’s oil output at 1.5 million bpd in 2024. This indicates a potential production cutback and highlights the need for strategic planning to ensure economic stability and growth.

In conclusion, while Nigeria’s oil sector is experiencing a resurgence, there are areas of concern in the non-oil sector that require attention. Strategic investments, policy adjustments, and targeted interventions will be essential for steering the economy towards sustainable and inclusive growth in the coming years.