Can Nigeria Regain The Continent’s Largest Oil Producer Title?

Nigeria, which owns the tenth-largest oil reserves in the world, is all set to improve its standing in the global oil market. Can Africa's largest economy afford to regain its lost title of the continent's largest oil producer when green energy sources are knocking on the door?

Citing new discoveries in the northern part of the country for the first time and boosting capacity at two new refineries, the nation's oil minister Timipre Sylva said on Nov. 28 that Nigeria will stop importing petroleum products from the third quarter of next year.

A refurbished refinery in Port Harcourt in the Niger Delta will be operational this month-end with a capacity of 60,000 bpd of refined crude oil while the new Dangote refinery will start production in the first quarter of next year.

Recently, over one billion barrels of oil and 500 cubic feet of gas have been discovered in Gombe State in the northern part of the country.

The nation is banking on its four refineries, with a combined capacity of 445,000 barrels per day, to meet the domestic demand and end importing oil.

Nigeria, Africa's largest oil producer two years ago, has been edged out by Libya and Angola. Africa's most populous nation swaps high-priced crude for gasoline, which it sells at a loss. In 2020, it imported gasoline worth $43 billion.

Can Nigeria rise up to the expectations of the West? Venezuela has over 300 billion barrels in oil reserves, while Nigeria has 37 billion barrels and the U.S. has 36 billion barrels worth in reserves.

But when it comes to production, the U.S. is five times ahead of both countries combined.

The country is currently struggling to meet its daily production quota, with 1.5 million barrels per day against the daily quota of over 1.8 million barrels per day.

Saudi Arabia churns out 10.1 million barrels per day, Russia 10.05 million barrels per day, Iraq 4.25 million barrels per day, Iran 2.54 million barrels per day, and the UAE has the daily production of 2.95 million barrels.

The plan behind the decision to stop importing oil is to improve daily production to meet 4 million barrels per day target set for 2025.

In 2010, Nigeria targeted producing 4 million barrels per day when its output peaked at 2.5 million barrels per day. Mainly because money is hard to come by, the target has remained on paper. Besides, investment in drilling technology and infrastructure are conspicuous by their absence in Nigeria.

Theft, dwindling spare capacity, underinvestment, and infrastructure restraints all have made the daily production a costly affair. Oil theft alone took away $3.2 billion from the exchequer between January 2021 and February 2022.

If the production cost is $45 bbl in Angola, and $44/bbl in Uganda, Nigeria has to shell out $48/bbl.

Last year in June, daily fuel consumption in Nigeria increased from 60 million litres to 103 million litres. The government plans to meet the skyrocketing domestic demand as India, the largest buyer of Nigeria's oil, has shown a special interest to Russia's Ural over Nigeria's Bonny light.

From about $90 per barrel a week ago, oil prices are currently hovering around $80, a fall of $10. Russia is reported to be giving oil to India at a cheap $35, while Nigeria's Bonny light costs $105. Besides, Nigeria also failed to find buyers in European capitals. So, it is sitting pretty with a good amount of stock.

The west is mulling over a price cap on Russian oil between $65 and $70 a barrel to curb flow of revenue to Moscow's coffers and to limit its funding for the special military operation in Ukraine.

With 86 days left for the 2023 general elections in Africa's largest economy, President Muhammadu Buhari is betting big on oil as he is getting ready to quit in February at the end of his second and final term.

Before his final days in office, he is also gambling with fossil fuel, while nations across the world are shying away from hydrocarbon sources.