Nigeria’s 2024 national budget may be facing funding challenges due to a sustained decline in oil prices and stagnant crude oil output.
Over 70 percent of Nigeria’s budget is funded by oil revenue. Recently, the price of Bonny Light, Nigeria’s premium grade of oil, fell to $76.54 per barrel, down from an average of over $80 per barrel in May 2024. This price drop represents a 1.8 percent shortfall compared to the 2024 budget reference price of $77.97 per barrel.
This situation follows a report from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), which estimated the nation’s oil output, including condensate, at 1.4 million barrels per day (bpd). The Organisation of Petroleum Exporting Countries (OPEC), in its May Monthly Oil Market Report (MOMR), recorded Nigeria’s oil output, excluding condensate, at 1.28 million bpd in April 2024.
Last month, concerns over the nation’s oil output were minimal due to crude prices remaining relatively high at over $80 per barrel. However, with the recent decline in both price and output, worries have increased, especially since the 2024 budget is based on an oil price benchmark of $77.97 per barrel and a production target of 1.70 million bpd, including condensate.
Mazi Colman Obasi, National President of the Oil and Gas Service Providers Association of Nigeria (OGSPAN), emphasized the critical role of oil in Nigeria’s economy. He stressed the importance of increasing oil production and protecting it from theft to meet budget targets.
OPEC’s latest MOMR highlighted that total OPEC-12 crude oil production averaged 26.58 million barrels per day (mb/d) in April 2024, a decrease of 48,000 barrels per day (tb/d) month-on-month. While crude oil output increased in Congo and Iran, it decreased in Nigeria, Iraq, and Venezuela. Non-OPEC DoC crude oil production also saw a reduction, averaging 14.44 mb/d in April 2024, 198 tb/d lower month-on-month, with production increases in Bahrain but decreases in Russia and Kazakhstan.
Despite ongoing efforts to combat pipeline vandalism, oil theft, and illegal refining, Nigeria’s output remains below the 1.70 million bpd benchmark set in the 2024 budget.
The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, highlighted the involvement of local populations in illegal refining and its detrimental effects on the environment. He urged collaboration with the government to address this issue, noting that proceeds from illegal refining are insufficient for community needs.
Lokpobiri reaffirmed President Bola Tinubu’s commitment to supporting Nigerians, including the Ijaw people, who play a strategic role in the country. He stressed that oil remains the backbone of Nigeria’s economy, contributing at least 90 percent of foreign exchange earnings.
Nnemaka Okafor, Lokpobiri’s media aide, expressed optimism that Nigeria’s oil production, including condensate, which was approximately 1.7 million bpd prior to recent challenges, will be restored. He mentioned that the Ministry of Petroleum Resources is actively developing policies to maximize the use of available wells, aiming to increase production and generate vital revenue. This increased revenue is expected to stabilize the nation’s foreign exchange reserves and support the government in fulfilling its infrastructure commitments outlined in the 2024 budget.
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