24 December 2014, Lagos –
The contribution of Nigeria’s oil sector to the Gross Domestic Product is lower than that of many of the other members of the Organisation of Petroleum Exporting Countries, analysis of data obtained from the 12-member oil cartel has shown.
The rebasing of the country’s GDP in April had clearly underscored the decline in the contribution of the oil and gas sector to the GDP in recent times.
Prior to the rebasing, the contribution of crude oil and natural gas to the nominal GDP was 40.86 per cent in 2011, 37.01 per cent in 2012 and 32.43 per cent in 2013.
After the rebasing, the sector’s share of the GDP stood at 17.52 per cent, 15.89 per cent and 14.40 per cent for 2011, 2012 and 2013, respectively.
Nigeria, Africa’s top oil producer, derives 95 per cent of export earnings and 70 per cent of government revenue from the oil sector, which saw its contribution to the real GDP dropping below 11 per cent in the third quarter of this year.
The National Bureau of Statistics, in its third quarter report, said the oil and gas sector contributed about 10.45 per cent to the real GDP in the third quarter, lower than the 10.76 per cent contribution in the second quarter of 2014.
The decline in the sector’s contribution was attributed to production challenges, which led to reduction in the average daily production of crude oil in the third quarter.
In Angola, Africa’s second largest oil producer, oil production and its supporting activities contribute about 45 per cent of the nation’s GDP. Oil and gas sector accounts for about 60 per cent of Kuwait and Libya’s GDP.
In Saudi Arabia, the cartel’s largest producer, the oil and gas sector accounts for 48 per cent of the GDP. Qatar’s oil and natural gas account for about 55 per cent of the GDP.
About 40 per cent of the United Arab Emirates’ GDP is directly based on oil and gas output, while Venezuela’s oil and gas sector is around 25 per cent of the GDP.
The President, International Association for Energy Economics, Prof. Wumi Iledare, said, “In Nigeria, the contribution of oil is mostly revenue, and revenue does not translate into GDP if there are no productive activities in the economy, which come from oil. If the local content law is fully implemented, the contribution of the oil sector to the GDP will rise.
“Right now, if you look at the majority of the people that have access to oil revenue, the great proportion is spent on goods and services that are produced abroad. We more or less use the oil money for personal consumption, which are goods not manufactured in Nigeria. That is the reason why you don’t see much contribution from the oil sector to the GDP. The linkage is not deep enough within the productive sector of the economy.
“The current contribution of the oil sector to the GDP is low, considering that the sector commands about $19bn a year. If we are able to ensure that a large proportion of the money spent on exploration and production in the country is retained here, the contribution to the GDP will increase.”
The Director, Centre for Petroleum, Energy Economics and Law, Prof. Adeola Adenikinju, said something needed to be done about the oil sector as oil, which generates most of the government revenue, was contributing just about 14 per cent to the GDP.
“Unless we do something about the Petroleum Industry Bill, the uncertainty in the sector will linger,” he said.
– The Punch