For too long, the story of Nigeria’s oil sector has been one of unfulfilled potential: vast reserves hampered by theft, vandalism, and underinvestment. This has left the nation’s budget vulnerable, its foreign exchange earnings precarious, and its economic stability often at the mercy of global oil price fluctuations. However, recent trends in crude oil production have sparked cautious optimism, raising the question: is Nigeria’s oil sector finally staging a comeback, and what does this mean for the nation’s precarious revenue outlook?
After years of struggling to meet its OPEC quota and even its own budgetary targets, Nigeria’s crude oil production, including condensates, showed signs of an upward trajectory in 2024, averaging around 1.54 million barrels per day (mbpd), a notable increase from 1.34 mbpd in 2023. While this still fell short of the government’s ambitious 2024 budget benchmark of 1.78 mbpd, it represented a significant step in the right direction, providing a much-needed boost to foreign exchange earnings.
This positive trend, driven by a renewed focus on combating oil theft, better security measures in the Niger Delta, and some increased investment in upstream operations, carried into early 2025. January 2025 saw production reach a peak of 1.74 mbpd (including condensates). However, this “crude comeback” has not been without its volatility. Recent data for March 2025 indicates a slight dip to 1.60 mbpd (including condensates), reminding us that sustained stability is still a work in progress.
“Any increase in oil production is a welcome development for Nigeria, given our heavy reliance on crude exports for revenue and foreign exchange,” notes Dr. Aminu Barde, an energy economist. “It provides critical breathing room for the government to fund its budget, service debts, and support the Central Bank’s efforts to stabilize the Naira.”
Oil revenues typically account for a substantial portion of Nigeria’s government revenue (around 60-65% historically, though declining in recent years) and over 85% of its foreign exchange earnings. Therefore, even marginal increases in production, coupled with stable or rising global oil prices, can significantly impact the national treasury.
Higher production translates directly into increased crude oil and gas export revenues. This is crucial for funding the ambitious 2025 budget, which is anchored on an oil price benchmark of around $75 per barrel and a production target of 2.06 mbpd. While meeting this 2.06 mbpd target for 2025 remains a significant challenge, any movement closer helps reduce the need for borrowing.
Increased oil exports bolster Nigeria’s external reserves, providing the Central Bank with more firepower to intervene in the foreign exchange market and defend the Naira. The recent relative stability of the Naira, after a period of sharp depreciation, can partly be attributed to improved FX liquidity, to which rising oil proceeds contribute.
A more stable and predictable oil production environment can attract much-needed investment into the upstream sector. The government’s efforts to implement the Petroleum Industry Act (PIA) and conduct new licensing bid rounds, alongside the ongoing divestment of onshore assets by International Oil Companies (IOCs) to indigenous firms, are all geared towards boosting long-term production capacity and attracting fresh capital.
While the “crude comeback” is a positive sign, it is crucial for Nigeria not to fall prey to the “resource curse” syndrome. The nation’s over-reliance on oil has historically led to economic instability, Dutch Disease effects, and a neglect of other vital sectors.
Global oil prices are inherently volatile, influenced by geopolitical events and shifts in demand. A sustained drop in prices could quickly erode gains from increased production.
The recent recovery in production must not distract from the urgent need for economic diversification. Efforts to boost non-oil revenue, such as through tax reforms and strengthening the manufacturing and agricultural sectors, must continue aggressively. Data from 2024 shows non-oil revenue outperforming expectations, signaling a gradual shift, which is a positive sign.
A significant development is the rise of domestic refining capacity, particularly with the Dangote Refinery commencing operations and government refineries undergoing rehabilitation. This reduces Nigeria’s reliance on imported refined products, saving substantial foreign exchange. As refinery capacity utilization surged to 65% in 2024, it signals a strategic move towards energy independence.
The battle against oil theft and pipeline vandalism, while showing positive results, must be sustained through continuous intelligence gathering, community engagement, and robust security architecture.
In conclusion, Nigeria’s recent uptick in oil production is a welcome development that significantly improves the nation’s revenue outlook and provides critical support for macroeconomic stability. It reflects the concerted efforts to tackle the security challenges that have long plagued the sector. However, this “crude comeback” should be seen as a stepping stone, not a destination.
For true economic resilience and long-term prosperity, Nigeria must leverage this newfound stability to accelerate its diversification agenda, strengthen its non-oil sectors, and ensure that the benefits of its oil wealth are equitably distributed and prudently managed for generations to come. The future of Nigeria’s economy hinges on more than just crude; it hinges on strategic foresight and unwavering commitment to a diversified and sustainable path.
