Nigeria fails to capitalize on an oil price boom

STORY: Nigeria has failed to capitalize on an oil price boom that has helped cushion other exporters from the impact of inflation.

As a result, economists say millions more Nigerians are now facing poverty.

Data shows Nigeria’s state oil company NNPC did not contribute anything to state coffers for the first 8 months of 2022.

Even though crude prices are averaging $94 a barrel this year, a 42% rise on 2021.

Despite being Africa’s biggest oil and gas producer, the country depends almost entirely on imports to cover its gasoline needs.

It then subsidizes the cost to the public, which has created a disparity between the price at the pump in Nigeria compared to neighboring countries like Benin.

This has led to widespread smuggling across borders.

Professor Abiodun Adeniyi brands this “the high point of maladministration” in the system:

‘We cannot control processes and procedures. We are allowing theft to happen in a very significant sector like oil. And of course, the theft is leading to the profiteering of individuals, cabals you know, probably collaboration with international agents to defraud this nation.’’

As gasoline disappears abroad, the country is forced to buy far more than it needs - around twice the amount, by some estimates.

That wipes out the gains that should have been made from crude exports.

Although the Nigerian government announced plans to remove the gasoline subsidy last year, it then backtracked in July, citing concerns over potential unrest.

Oil and gas association president Osifo Festus says huge amounts of crude are also lost:

‘’When you pump in 10,000 barrels into the pipeline, at best you are going to get about 1,000 barrels from the end. Over 95% of this crude oil pumped into the pipeline, they are vandalized. So because of that majority of them have to stop production.’’

Estimates of the amount of gasoline smuggled abroad vary.

Some independent researchers say around 15 million liters a day – while NNCP’s own assessment is 42 million.