FG cities lack of investment as reason for low crude oil output
The federal government has attributed the decline in Nigeria’s crude oil production output to inadequate investment in the sector.
Abubakar Bagudu, minister of budget and economic planning, spoke on Wednesday at the ‘Ministerial Sectoral Updates’ in Abuja.
The minister said the government initiated a microeconomic reform as part of the renewed hope agenda to address the root causes of low investment and revenues.
“We embarked as part of the renewed hope agenda on a microeconomic reform because that was what was responsible for low investment, low revenues, and our economy size was shrinking. It was too small compared to our need,” Bagudu said.
“That is why we are not even producing crude oil in the quantity we used to before or as allowed by international convention, which is our OPEC quarter, because of underinvestment, whether in the physical infrastructure itself or security.”
On May 14, the Organisation of Petroleum Exporting Countries (OPEC) said Nigeria’s average daily crude oil production rose to 1.28 million barrels per day (mbpd) in April.
This is below the 1.78 million bpd estimate adopted in the 2024 budget by President Bola Tinubu, and the production quota of 1.5 million bpd set for the country by OPEC in 2024.
Although, on May 29, Mele Kyari, group chief executive officer (CEO), Nigerian National Petroleum Company (NNPC) Limited, said the country’s oil production volume is close to 1.7 million bpd.
According to Kyari, Nigeria has the potential to produce two million barrels per day but the country is unable to due to pipeline vandalism and oil theft.
He said on April 17, 2020, Nigeria’s production rose to 2.2 million bpd because the COVID-19 period and lockdown forced oil thieves and pipeline vandals to shut down their illegal operations, and “go to sleep”.
Also, on May 20, Heineken Lokpobiri, minister of state for petroleum resources (oil), asked the United Arab Emirates (UAE) to invest in Nigeria’s oil and gas pipeline infrastructure.
He said the pipelines need renewal as they have outlived their lifespan.
Lokpobiri said Nigeria should be producing more than 37 billion barrels of crude, adding that the current administration had emphasised the need to resume drilling campaigns to ensure more discoveries.
The minister said aside from the oil and gas sector, other sectors are also experiencing underinvestment, adding that the nation’s infrastructure is not aligning with the government’s dreams.
According to Bagudu, these sectors include the education system, healthcare system, creative economy, digital economy, and the steel sector.
Bagudu said the solution to eliminating low investment is to restore a macroeconomic environment that can stimulate investment and generate revenues for the economy.
“Food security, despite our potential, we are underinvesting. Most of our farmers are one-season per year farmers,” he said.
“Our infrastructure is not catching up with our dreams. Our educational system, our health system is suffering from underinvestment. In addition to our other sectors, the creative economy, digital economy, and the steel sector.
“The answer to all this is to restore macroeconomic stability that will ensure that investors, both domestic and international, put their faith in our economy once again.”
Bagudu said while the exchange rate and inflation are not yet at the desired levels, the government is on the right path to restore the economy.
