Lagos, Jan. 3, 2024: Some stakeholders in the oil and gas industry have projected a rapid economic growth for Nigeria in 2024, based on increased oil production for the year.
The stakeholders shared their views and expectations for this year in separate interviews on Tuesday in Lagos.
The stakeholders explained that Nigeria will during the period exceed its crude oil production target of 1.7 million barrel per day (bpd).
Dr Ayodele Oni, Partner, Bloomfield Law Practice, said that the oil and gas industry was one of the most impactful sectors in 2023.
Oni said that the sector, however, elapsed around mid-year in 2023, largely because of the decline in petroleum production, political uncertainty and theft.
According to him, there was significant improvement in the fourth quarter of 2023 for the oil and gas sector.
“In terms of infrastructure, it has been a good year with projects like the AKK, Dangote Refinery, and marginal field production being witnessed.
“No doubt, 2024 will be very exciting for the petroleum industry,” he said.
The expert attributed the inability to meet the petroleum production quota in the year under review to theft and lack of key infrastructure.
To address these challenges, he advised the government to take steps to incentivise crude oil production and foreign investment in the sector, reduce petroleum theft as well as pipeline vandalism.
Oni noted that the government could also create proactive business environment for investors and develop key infrastructure within the industry.
“When incentives are introduced, they must not only be paper incentives but must be obtainable in reality and with ease,” he added.
He also said that in the period under review, the government, no doubt made significant improvements in petroleum refining.
Oni said that the first private refining facility owned by Dangote was commissioned while the existing refining facilities are being aggressively refurbished just as steps are being made to inaugurate new refinery projects.
“Similarly, in terms of gas policies, the government has continued to show its commitment to develop Nigeria not just as an oil-rich country but as a gas super power.
“Policies and activism have been demonstrated in developing the gas sector as much as the oil sector.
“In terms of the applicable law and deregulation, steps have been taken to ensure the enforcement of key provisions of the Petroleum Industry Act.
“Steps are actively being taken by key regulators to ensure that the oil and gas sector continue to have the right regulatory structure to support the growth being projected.
“The Compressed Natural Gas (CNG) project has been initiated by the federal government in recognition of the enormous gas potential of the country and the significant benefits offered by gas when compared to other fuel source.
“Whereas the key gas/CNG projects are currently in the incubation stage, significant progress is envisioned.”
He added that government had been very proactive in issuing out key policies and regulations that drive the growth of the petroleum industry.
He said that most policies had been practical with strong consideration for the economic realities, adding that without doubt, the government had been proactive in taking steps to the highest possible level.
While sharing his views, Oni said, “I expect that there will be a lot more dedicated efforts. New regulations will be passed to ensure certainty, key infrastructure projects will be completed to act as a backbone to the structure, and the challenges will be tackled more directly.
“The federal government will also do more around its fuel subsidy substitution approach with natural gas playing a critical role.
“No doubt it will be an interesting year with the likelihood of major improvements.”
He advised government to focus primarily on conducive investment-friendly ecosystem, reduce pipeline vandalism and crude oil theft, certainty of the regulatory, political climate and investment in key infrastructure.
Mr Joe Nwakwue, Partner, Zera Advisory and Consulting Ltd., described the overall business environment as challenging.
He, however, said that the development had stalled sectoral investment and activity levels.
Nwakwue said that PIA anticipated gains are slow mainly due to slow and tentative implementation of the law and issues around regulatory uncertainty.
Nwakwue, also a former chairman, Nigerian Association of Petroleum Explorationists (NAPE), said, “I expect a better 2024.
“We have started to see increasing rig counts, enhanced pipeline security and one hopes that the new sheriffs in charge of the sector will settle down to drive the growth of the industry.
“We need to pay attention to upstream gas development. The market is presently under-supplied and that would impact our gas-based industrialisation aspirations.
“We also need to ramp up some green field and brown field redevelopment. I expect that the industry should be able to deliver the budget benchmark volumes at a minimum rate.”
The expert noted that there are many ways one could look at the sectoral performance, contribution to GDP, output level and activity level among others.
He said: “I would say the 2023 performance is a mixed bag. Output levels have remained low, investments levels were low but picking up lately, sectoral GDP contribution remains low at under six per cent.
“In analysing this, we must also factor the fact that 2023 was an election year and we saw heightened political and economic uncertainty.
“The 2023 performance is less than cheery in my view.
“Streaming of refineries are behind schedule, PIA implementation has been slow and painful, CNG roll-out has been more about media attention and bargaining chip with labour, etc.
“One bright spot is the subsidy removal even when I feel that it could have been better done,” Nwakwue explained.
Mr Bamidele Adesina, an oil and gas analyst, said that there are factors that will limit this growth, including high inflation and interest rates.
Adesina said that the reversal of economic reforms and potential security issues in the oil-producing Niger Delta region may pose challenges.
“The economy is forecast to grow at a faster pace in 2024 relative to this year’s projected expansion on the back of higher oil output.
“That said, elevated inflation and interest rates will keep a lid on growth. The reversal of economic reforms, and potential insecurity in the oil-producing Niger Delta.
“Focus-economics see GDP expanding 3.2 per cent in 2024 and expanding 3.6 per cent in 2025.”
Adesina noted that the recent weakening of the Naira and the increase in petrol prices led to higher consumer prices in July and August 2023.
He said that the rise in prices had put pressure on private consumption.
“To address the rising cost of living and social unrest, the government announced a temporary minimum wage increase for the next six months in early October 2023.
“Additionally, in an effort to tackle the surging transportation costs, the government revealed plans to introduce buses powered by Compressed Natural Gas (CNG).
“The combination of a weaker Naira and the removal of fuel subsidy will likely result in continued inflation in the upcoming quarters. It pointed out that monetary policy and fuel prices will be critical factors to monitor,” he said.
According to him, consumer prices are expected to increase by an average of 22 per cent in 2024, which is an increase of 0.9 percentage points from the previous month.
“In 2025, consumer prices are projected to rise by an average of 14.9 per cent.
“The increased crude oil output, particularly with the Dangote Refinery scaling up production, will contribute to much-needed fuel supplies for Nigeria.
“However, the persisting instability in the Niger Delta region poses a significant downside risk to the overall economic outlook “while it also anticipated an average daily oil production of 1.35 million barrels in 2024,” he added.
Mr Heineken Lokpobiri, the Minister of State for Petroleum Resources (Oil) on Dec. 12, said that the federal government was making efforts to remove all bottlenecks that will limit the country from meeting and surpassing the projection.
Lokpobiri spoke about government’s efforts at a stakeholders’ interactive session on ‘Creating value and enabling investments in Nigeria’s oil and gas sector’, organised by Chevron Nigeria Plc.
The minister reiterated that Nigeria can increase crude oil production to two million bpd, noting that issues hindering this are being discussed.
“As a government, we are willing to sustain that engagement with the stakeholders so that in 2024 and beyond.
“We will ensure that we produce not just 1.7 million barrels per day (bpd) that we need for our budget but ensure that we produce what is needed to meet the local demand,” he said.
He highlighted the sector’s growth trajectory since the current administration took office, revealing that the country’s oil production has moved from about 1 million bpd and steadily increased to 1.4 million bpd.
The minister said his goal is to continue this upward trajectory, adding that the government was committed to creating an enabling environment for stakeholders to thrive.
“As a new government that is business-friendly, with a clear mandate to ramp up production, we are willing to ensure that our fiscal regime is competitive globally.
“My appeal is that this old marriage, let us manage it, sustain it and improve on it. Whatever your concerns may be, let us put them on the table to disagree to agree.”
Lokpobiri reassured stakeholders of the government’s effort to address challenges facing the sector by providing the best playing field for both international oil companies (IOCs) and independents for necessary investment.