“Growth decreased by 10.44 per cent points, when compared to first quarter, which was 2.21 per cent”
By Fred Ojiegbe
Nigeria’s average daily production stood at 1.61 million barrels per day, (mbpd) in the second quarter of 2021, which is -0.19mbpd lower than the average daily production of 1.81mbpd recorded in the same quarter of 2020, and -0.10mbpd lower than the 1.72mbpd recorded in the first quarter of 2021, latest data from the National Bureau of Statistics (NBS) has revealed.
The data explained that real growth of the oil sector was 12.65 per cent (year-on-year) in second quarter, indicating a decrease of 6.02 per cent points relative to the growth rate recorded in the corresponding quarter of 2020. Growth decreased by 10.44 per cent points, when compared to first quarter, which was 2.21 per cent.
For the first half of 2021, the data stated that the real gross domestic product (GDP) was recorded at 7.13 per cent, compared to 0.80 per cent for the first half of 2020 – the performance reflecting lower oil output. Quarter-on-quarter, the oil sector recorded a growth rate of 20.35 per cent in Q2 2021.
The oil sector also contributed 7.42 per cent to total real GDP in Q2 2021, down from figures recorded in the corresponding period of 2020, and down compared to the preceding quarter, where it contributed 8.93 per cent and 9.25 per cent, respectively.
Fuel price increases by 10.87% in August
The NBS data also stated that Nigerians paid more for the premium motor spirit (PMS), otherwise known as petrol, in August 2021. The data stated that the average price paid by consumers for petrol increased by 10.87 per cent year-on-year, and decreased month-on-month by 0.58 per cent to N164.91 in August 2021, from N165.91 in July 2021. States with the highest average price of petrol were Abia (N173.14), Ebonyi (N170.13) and Lagos (N168.31), while states with the lowest average price of petrol were Niger (N162), Borno (N161.71) and Kano (N158.75).
According to the NBS data, going by average prices across Nigeria’s geo-political zones, the South-East had the highest rate of N173.14, with Abia topping the list, while Enugu had the least with N164.62. In the South-South, Edo and Cross River states paid the highest price of N166, while Rivers State paid the lowest price of N163.41.
Meanwhile, in the South-West, Lagos State paid the highest price of N168.31, while Ondo State paid the lowest price of N163.53. The data also stated that North-West zone paid N165.63, the lowest price comparatively. It explained that within the zone, Sokoto State paid the highest price of N165.53, while Kano State paid the lowest price of N158.75.
In the North-East zone, Yobe State had the highest price of N165.83, while Borno State had the lowest price of N161.7, while North-Central saw Plateau State posting the highest price of N165.33, while Benue State had the lowest price of N162.
Reacting to the latest NBS data, Ben Akabueze, Director General, Budget Office, stated that Nigeria’s oil production is beyond its control.
“The oil revenue is dwindling and it is dwindling because it is something we don’t control. Basically, the vagaries that determine oil price are outside of our control. Even the quantity that we can produce and sale in the international market is out of our control. We are members of OPEC (Organisation of Petroleum Exporting Countries). OPEC determines the quantity.
“Right now, we have domestic capacity to be able to produce up to 2.5 million barrels of crude oil per day, but current production, even if you add the condensates which don’t count towards the OPEC quota, it is only 1.7 million barrels, and our OPEC quota is less than 1.5 million barrels.
“On the aggregate revenue side, because we are producing less and because our costs are also high, we have become a high cost producer largely because of insecurity in the oil producing zones. Because of the history of insecurity, companies that operate there have now had to devote a lot of resources to securing their operations. Even as we speak, there continues to be vandalisation of oil pipelines and whenever that happens somebody has to step in and remediate it at a cost, and sometimes when that happens it even disrupts your ability to sell.
“In Saudi Arabia which is one of the lowest cost producers in the world, it is desert land. The pipelines are on the surface all over the place, nobody is vandalizing pipelines. Here we are having to incur costs to bury the pipelines deep in the ground, so your cost becomes higher, and despite that people still go after it deep in the ground. So, these have eroded our revenue earnings to become a high cost producer. Then you know we don’t control the aggregate revenue. So, these are why the oil revenues are down,” Akabueze said.
Finance analysts from CardinalStone commended OPEC’s decision to increase production, maintaining that on “the oil front, the OPEC decision to gradually increase production by 0.4 mbpd on a monthly basis, starting August 2021, portends positively for oil GDP in the coming quarters. This development is likely to be supported by the completion of routine maintenance operations across key terminals, as well as the resolution of industrial actions and power outages that have recently plagued the sector. Thus, aided by the relatively low base created by weaker oil output in H2’20 and recent traction on the non-oil front, we see legroom for a 2.7 per cent GDP growth for 2021 (vs 3.1 per cent previously). Our downward GDP growth adjustment primarily reflects weaker than expected Q2’21 oil GDP reading”.