REVENUE from oil export fell by a whopping 41.44 percent to $2.033 billion in the first nine months of 2020, compared to $3.47 billion received in the corresponding period of 2019, data from the Nigerian National Petroleum Corporation, NNPC, has revealed.
NNPC had, in its September 2020 edition of the Monthly Financial and Operations Report (MFOR) disclosed that revenue from oil and gas export for the month of September, 2020, rose by 16 percent to $120.49 million.
But a closer look at previous months’ data contrasted with corresponding months’ figures in 2019 which shows a huge cumulative decline in revenue from oil export.
In September 2019, for instance, oil and gas export amounted to $355.3 million, compared to $120.49 recorded in September, 2020, a drop of $234.81 million or 66 percent.
In its various communications last year, the NNPC had hinted of the decline lamenting that the global outbreak of the Covid-19 in early 2020 led to a huge drop in the demand for crude oil and gas as many countries went into lockdown to curb the spread of the pandemic. This led to massive drop in price of oil with Nigerian grades hitting its lowest point in recent years at $9 per barrel in May, 2020.
The figures for August were not quite different as $139.50 million was received from oil export in 2020, compared to $205 million in 2019, a drop of $65.86 million or 32.07 percent.
In July 2020, as the economic impact of the Covid-19 became more glaring, oil export revenue fell to its lowest for many years with Nigeria earning just $84.63 million, compared to $335.07 million received in the same month in 2019. This was a massive 74.7 percent drop with the country losing $250.44 million.
In June 2020, oil export revenue was $256.06 million, a 20.2 percent fall or $65.17 million compared to $321.23 million earned in corresponding month in 2019.
Data for May 2020 was not too different as earning from oil export fell significantly by 69.87 percent to $174.80 million compared to $580.32 million recorded in May 2019.
In April 2020 oil export earnings also fell by 58.36 percent to $195.82 million when compared to $470.33 million received in April 2019, a drop of $274.51 million.
The figures for March 2020 showed that Nigeria earned $256.19 million from oil export, a drop of 33.04 percent when compared with the $382.63 million received in March, 2019.
NNPC report also showed that oil export earnings for February 2020 declined by $119.34 million or 24.35 percent to $370.69 million when compared to $490.03 million received in February 2019.
Data for January 2020 was the only positive with global economy still strong and demand for oil still high, as the market remained unaware of the devastating impact of Covid-19 will bring on the world economy.
The earning for the month was $434.85 million, $103.84 or 31.37 percent higher than the $331.01 million earned in January, 2019.
Impact on Economy
Both the Federal Government and some economy analysts have attributed the economy’s recent slide into recession to adverse developments around the oil sector.
The petroleum industry supplies more that 80 percent of Nigeria’s foreign exchange even though it contributes just about nine percent to the Gross Domestic Product, GDP.
According to the National Bureau of Statistics, NBS, the GDP went negative at -3.62 percent in the third quarter of 2020, after recording -6.1 percent in the second quarter, putting the economy squarely in recession.
A country is technically in recession if it reports two consecutive negative growths in GDP.
Reporting the economic performance for period, NBS had stated: “Q3 2020 Real GDP contracted for second consecutive quarter by -3.62% (-6.10% in Q2 2020 & 2.28% in Q3 2019). Cumulative GDP for the first 9 months of 2020 therefore stood at -2.48%”.
According to the statistics office, Oil GDP contracted by -13.89% (-6.63% in Q2 2020; 6.49%% in Q3 2019), while non-Oil GDP contracted -2.51% (-6.05% in Q2 2020; 1.85% in Q3. 2019).
Speaking to Vanguard Public Finance Report in a telephone interview, Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, said the drop in earnings was not surprising given the impact of the Covid-19 pandemic globally.
Omorogbe called for the revamping of Nigeria’s petroleum sector laws and the diversification of the economy away from oil revenue dependence.
According to her, “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.
She noted that the impact of the decline “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.
Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.
“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.
She pointed out that even though most economies across the globe were in a recession, ‘‘Nigeria was badly hit because we are leaning on an industry that was already battered even without Covid-19. But it is just a sign, we need to sit up. It is no longer business as usual.
“The new normal in the petroleum industry is actually what should have been normal long ago. So we have to sit down and say our new normal is to work at making sure that our petroleum industry functions in a way that it should for the benefit of all Nigerians.
“The second thing we have to think of is the fact that we must diversify. We don’t just need to think about that but act it, stimulate it, energise every effort to get away from an unnecessary over-focus on the petroleum industry.
“The Petroleum Industry Bill, PIB, is the beginning and not the end. It is the law that will help put the framework for a new structure for the petroleum industry in place. Having a PIB, one, does not mean we have arrived at restructuring the industry but, two, having a PIB and ensuring that we diversify are two different things. We have to really work at diversifying for our common good”, she added.
Also speaking in a telephone interview, energy expert, Henry Adigun, gave further insight into the oil revenue decline, saying it was as a result of several factors including the sharp drop in demand occasioned by global pandemic, leading to the fall in oil price and the fall in export volume due to production quota imposed by the Organisation of Petroleum Exporting Countries, OPEC, and its allies to curb supply and mitigate glut.
According to him, Nigeria must focus on refining and processing its crude oil in-country as that would allow it to earn export value of about $2,000 from every barrel rather than $55 per barrel.
He stated: “The average earnings for Nigeria on oil export is between $100million and $120million monthly, and that is the fiscalisedmoney. But there are two things that affect the earnings, the volume you can sell and the price you can sell it at. If you are cut by OPEC that you cannot sell more than this volume, then there is nothing you can do”.
Also Adigun agreed that for Nigeria to avoid the challenges it faced in the past year, it must diversify the economy.
“There are two things. The first is what they have been trying to do, diversify the economy from oil and then ensure that you have non-oil products that can earn foreign exchange.
“Second thing is increase the yield of your oil locally, so that what you lose in sales, you can make up in utilization of the barrel of crude in terms of added value. A barrel well utilized will benefit you more. If a barrel is $55, you can make about $2,000 when refined. There is a potential to make more money when you add value. The sector should not be export focused”, he added.OMOKOSHABAN