Amid Declining Production, Oil Sector’s Contribution to GDP Down 11.2%

Emmanuel Addeh in Abuja

Nigeria’s declining hydrocarbons production has continued to take its toll on the oil and gas sector’s contribution to the economy, falling by as much as 11.27 per cent in terms of its input to the country’s Gross Domestic Product (GDP) in one year.

Data from the latest audit released by the Nigeria Extractive Industries Transparency Initiative (NEITI) covering 2021, indicated that the sector from which Nigeria earns about 90 per cent of its foreign exchange, only contributed a paltry 7.24 per cent during the period compared to the 8.16 the previous year.

“In 2021, the sector contributed 7.24 per cent to Nigeria’s total GDP of N173.5 trillion ($434.17 billion). This was a decrease of 11.27 per cent compared to the 2020 contribution of 8.16 per cent of the N152.32 trillion ($381.11),” the document stated.

However, the industry contributed an even lesser 5.9 per cent to the total real GDP recorded in the last quarter of 2021, which was about 2.3 per cent decline from the previous quarter.

From other sources reviewed by THISDAY, particularly the National Bureau of Statistics (NBS), and Statista, the figures of the sector’s addition to the GDP have since NEITI concluded work on the recent report, even gone worse, declining to 6.63 in Q1, 6.33 in Q2, 5.66 in Q3 and 4.34 per cent in Q4 2022.

In its stead, the Information and Communications Technology (ICT) sector, has since taken over, contributing 18.44 per cent to Nigeria’s GDP in the second quarter of 2022, a 6.55 per cent growth rate from Q1 2022. Before now, the contribution of the oil sector dominated the country’s GDP bottom line.

In relation to exports, the NEITI report stated that crude oil contributed N14.40 trillion ($36.55 billion) of the total export of N18.91 trillion  ($ 47.31 billion) in the 12 months under consideration.

This, it said, represented 76.22 per cent of the total exports in 2021 and a marginal increase of 0.8 per cent compared to 2020, which was 75.42 per cent.

The relatively higher export value in 2021 compared to 2020, the report noted, was due to an increase in crude oil price in 2021. The average equity crude price in 2021 was $66.97 per barrel compared to the average price of $41.65 per barrel in 2020.

“The total government revenue generated in 2021 was N10.75 trillion, to which the oil and gas sector contributed N4.358 trillion. This represents about 40.55 per cent of the total revenue compared to 51 per cent in 2020,” it added.

Nigeria’s oil production has been declining since 2020, initially triggered by the Covid-19 pandemic. Before then, the country produced as high as 2.2 million barrels per day.

Although at first the then Minister of Petroleum Resources, Timipre Sylva and the Nigerian National Petroleum Company Limited (NNPC) blamed the inability to restart the oil wells shut down due to several technicalities, however, they later told the public that the resource was being massively stolen in the Niger Delta.

Aside oil theft; the government has also blamed vandalism for its inability to meet its Organisation of Petroleum Exporting Countries (OPEC) quota. In August Nigeria was only able to produce 1.18 million bpd of its allocated 1.742 million bpd.

This simply means that Nigeria loses as much as 560,000 bpd to theft and vandalism despite its current desperate need for FX to stabilise the crisis-ridden foreign exchange market.

In terms of how many people the industry employs, the report stated that although NEITI requested employment from the 70 companies (NLNG inclusive) close to a dozen did not respond.

Of these, it explained that 11 companies did not provide the required information while four companies are affiliated with three other companies and operating with the same sets of employees.

 In all, the 56 respondent companies confirmed the engagement of 19,171 employees, with 15,639 (82 per cent) being male and 3,532 (18 per cent) of the employees being female respectively.

The data also revealed that 2,325 (12 per cent) was top or high-level positions, while 11,312 (59 per cent) and 5,534 (29 per cent) were middle level and the lower-level employment positions respectively.

 While 83 per cent of the employees was recruited from the local/state/ host communities, the document indicated that 15 per cent was from other states, while 2 per cent were expatriates.

During the period under review, Nigeria lost 22,735 barrels or 3.72 million litres of crude oil in 410 incidents, a 22 per cent rise in incidence when compared to 18,563 barrels or 3 million litres recorded in 2020 in 384 incidents.

The report however hinted that the data was limited as there were numerous pipeline vandalism in 2021 in the Niger Delta region.

 Besides, in 2021, the total sum expended as quasi-fiscal expenditure amounted to $6.931billion (equivalent of N2.651 trillion).

“These amounts were deducted from Federation’s revenue before remittance without appropriation by National Assembly. The circumstances for the loans taken in the past to settle marketers under the petroleum subsidy scheme, which are being recovered from the monthly federation revenue proceeds under pre-export financing and Project Eagle agreement remains unclear,” the document stated.

It noted that there was the need to ensure adequate oversight over the expenditures that are not captured in the national budget, while the NNPC should transparently disclose details of the subsidy and the beneficiaries of the payments, in addition to rendering accounts on the loan transaction.

“The pre-export financing arrangement and all other loan arrangements in exchange for crude oil and gas should be extensively reviewed/investigated,” it noted.

On the environment, it highlighted the overlapping responsibilities between the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Federal Ministry of Environment (FMOE).

“This could offer companies that pollute the environment to take advantage and choose the regulator to obey. The agency’s process and or rules should be streamlined and not overlapping.

“The administration of the Environmental Remediation Fund should be vested in NUPRC. The procedure for assessing compensation for environmental damage should be clearly documented and put in a public repository,” it stated.