Oil price slump: Oil sector records N3.6tn decline in revenue

*Offshore oil rig.

*Offshore oil rig.

Oscarline Onwuemenyi

29 March 2016, Sweetcrude, Abuja – The massive drop in global oil prices impacted negatively on the performance of the Nigerian oil and gas sector, which recorded a decline of N3.6tn in revenue in the 2015 fiscal period.

The country, however, earned N1.94 trillion from the export of crude oil and other petroleum products in the fourth quarter, Q4, of 2015, according to data released by the National Bureau of Statistics, NBS.

The NBS, in its Foreign Trade Statistics for the Fourth Quarter of 2015, disclosed that Nigeria’s total exports in the period under review were dominated by petroleum products export.

The report showing the performance of the sector, which was obtained in Abuja, revealed that in monetary terms, the oil and gas sector recorded a huge decline of 37.5 percent from N9.61tn in 2014 to N5.99tn at the end of last year.

On the other hand, Nigeria spent N288.625 billion on the importation of Premium Motor Spirit (PMS) also known as petrol in the period under review.

Specifically, Nigeria, according to the report, exported crude petroleum oil and oils obtained from bituminous minerals valued at N1.674 trillion, Liquefied Natural Gas (LNG) export was put at N226.226 billion while the export of other petroleum gases stood at N18.726 billion.

In addition, Nigeria earned N8.772 billion from the export of liquefied butanes, N7.53 billion from Liquefied Petroleum Gas and other gaseous hydrocarbons; and N4.86 billion from the export of liquefied propane.

The report further put the value of Nigeria’s total exports at N2.077 trillion in the period under review, representing a decline of N256.5 billion, or 11 percent, over the value recorded in the preceding quarter.

It noted that on an annual basis, total exports from Nigeria stood at N9.729 trillion at the end of 2015, representing a drop of N6.575.2 billion or 40.3 per cent over levels recorded in 2014.

It noted that “Notwithstanding a steep decline in crude oil exports by N4.946 trillion or 41.6 percent in 2015, the structure of Nigeria’s exports is still dominated by crude oil exports.

“The contribution of crude oil to the value of total domestic export trade amounted to N6.945 trillion or 71.4 percent in 2015.” The report explained that the largest product exported by Nigeria in 2015 was Mineral products, which accounted for N8.574 trillion or 88.1 percent.”

Further analysis of the report showed that since the second quarter of the 2014 fiscal year, the petroleum sector had been recording steady decline in output. Between the first and second quarters of 2014, the sector witnessed an increase in output from N2.61tn to N2.63tn.

However, due to the drop in oil prices, which began in June 2014, the sector’s contribution to the economy could not be sustained as it started declining steadily from the third quarter. It dropped to N2.32tn in the third quarter of 2014 and further went down to N2.04tn in the fourth quarter.

In 2015, the sector witnessed its worst performance in recent times, contributing the sums of N1.39tn, N1.74tn, N1.53tn and N1.31tn to the economy in the four quarters of the year.

The report stated that the dismal performance of the oil and gas sector also impacted negatively on the contribution of the mining and quarrying sector to the economy.

There are four main activities that make up the mining and quarrying sector. They are crude petroleum and natural gas, coal mining, metal ore and other minerals.

The NBS report put the growth in the mining and quarrying sector at 5.18 percent for the fourth quarter of 2015 as against 8.56 percent recorded in the corresponding quarter of 2014.

It stated, “On a nominal basis, the sector slowed in the fourth quarter of 2015 by 35.12 per cent (year-on-year) during the quarter.

“This was substantially below the growth recorded in the corresponding quarter of 2014. This drop is attributable to the falling oil prices.”

“Other products that contributed noticeably to Nigeria’s exports include vehicles, aircraft and parts thereof; vessels etc. and prepared foodstuffs; beverages, spirits and vinegar; tobacco, whose values stood at N681.6 billion or 7.0 per cent, and N167.1 billion or 1.7 percent respectively, of the total exports of Nigeria for the year,” the report said.

Continuing, the report said: “Exports by continent showed that Nigeria mainly exported goods to Europe and Asia, which accounted for N3.867 trillion or 39.7 percent and the N2.946 trillion or 30.3 percent respectively, of the total export value for 2015.

“Furthermore, Nigeria exported goods valued at N1.4 trillion or 14.4 percent to the continent of Africa while export to the ECOWAS region totaled N608.3 billion.”

In addition, the NBS stated that “The total value of Nigeria’s merchandise trade during the Fourth Quarter of 2015 stood at N3.653 trillion, 9.2 percent lower than the value of N4.021 trillion recorded in the preceding quarter.

For the 2015 calendar year, the country’s total trade was recorded at N16.427 trillion, amounting to N7.252 trillion or 30.6 percent less than the total trade value recorded for 2014.

“This development arose largely due to a sharp decline in the value of exports; from N16.304 trillion in 2014 to N9.729 trillion in 2015, a decline of 40.3 percent. A decrease of N676.4 billion or 9.2 percent of the total imports in 2015 helped to mitigate the declining trade balance, which stood at N3.031 trillion, N5.899 trillion less than the value in 2014.”

About the Author