There seems to be little hope for economic recovery for Nigeria in the near future as the oil production shortfalls that have largely contributed to slow Gross Domestic Product (GDP) growth is expected to extend to the next three years.
The situation was confirmed on Wednesday by the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, after the Federal Executive Council meeting held in Abuja. According to the draft copy of the Medium Term Expenditure Framework 2023-2025, which was approved by the minister, the federal government has projected that the oil sector’s contribution to GDP will decline between 2023 and 2025 to 5%.
The oil sector has increasingly faltered quarter-on-quarter, trailing other sectors of the economy in contribution to Nigeria’s GDP growth.
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According to data published by the Nigeria Bureau of Statistics (NBS) in February 2022, the oil sector contribution to the Nigerian economy declined to 5.19% at N1.055 trillion in the fourth quarter of 2021, down by 3.68 basis points, from the 5.87% contribution in the corresponding period in 2020.
This is notably as a result of the decline in the nation’s oil output that has fallen short of its 1.753 million barrels per day (mbpd) OPEC’s quota. Nigeria’s oil production has dropped Year-on-Year, by 23.8% to 1.024 (mbpd) in May 2022, from 1.344 mbpd recorded in the corresponding period of 2021, according to the Organization of Petroleum Exporting Countries.
The Finance Minister said that in the draft document of the framework, crude oil price assumption for 2023 is $70 per barrel, 2024 is $66 per barrel and $62 per barrel for 2025, with an estimated production rate of 1.69 million barrels per day for 2023 and 1.813 million barrels per day for 2024 and 2025.
“The assumptions that we made for the next medium term framework from 2023 to 2025 is that crude oil price will be at $70 per barrel for 2023, $66 per barrel for 2024 and $62 per barrel for 2025.
“Crude oil production is projected to be 1.69million bpd for 2023 and 1.813million bpd for both 2024 as well as 2025.
“We have also projected on the nominal GDP, that the size of Nigeria’s economy will rise up to N225.5 trillion with 95 percent of this contribution by the non-oil sector while the oil sector will contribute only five per cent.
“And some steady increase from 2024 to reach up to N280.7 trillion in 2025. This means that Nigeria continues to retain its position as the largest economy in Africa,” she said.
The oil windfall orchestrated by Russia-Ukraine conflict presented a golden opportunity for OPEC members to increase their GDP – but Nigeria is missing in the party.
The Minister of State for Petroleum, Chief Timipre Sylva, has attributed the shortfalls to vandalism of oil installations and crude oil theft that has cost Nigeria’s economy N3.038 trillion in the past one year.
With a solution not in sight, the federal government appears to be shifting attention to non-oil sectors.
President Muhammadu Buhari has touted agriculture to be Nigeria’s new main source of revenue generation. But insecurity in the country, particularly in the northern region, has greatly stymied the aim.
Other sectors are also striving under an unfriendly business environment dominated by epileptic power supply, making it difficult for the non-oil sector to fill the gap created in the nation’s GDP by the oil production shortfalls.